Morgan Keegan seeks to reverse sports agent ruling

Feb 23 (Reuters) - Morgan Keegan & Co is hoping to recover money lost to a professional sports agent, who was awarded $400,000 in a securities arbitration ruling against the brokerage last week.

The Memphis, Tennessee-based firm filed a court action in New York on Wednesday to overturn the ruling by a Financial Industry Regulatory Authority arbitration panel, which resulted from the agent's claims that he incurred personal losses from bad bond investments.

W. Kyle Rote Jr., whose company Athletic Resource Management represents star clients such as Denver Broncos quarterback Tim Tebow, was the latest to allege that Morgan Keegan breached its contract by failing to disclose the extent of risk involved in his personal investments.

Arbitration awards are typically binding. However, parties can ask courts to overturn them in limited circumstances, such as when arbitrators misapply the law.

While proceedings to vacate arbitration awards are unusual, Morgan Keegan has tried to overturn numerous awards to investors involving a group of money-losing bond funds which have become the subject of state and federal regulatory actions.

For example, Morgan Keegan tried to challenge an award granted to former professional basketball star Horace Grant in September 2009, after the brokerage was ordered by arbitrators to pay $1.5 million to Grant. That case is still pending in a federal appeals court.

Trying to overturn an award is among Morgan Keegan's legal rights, but the practice does not "respect the finality of the arbitration decision," said Ryan Bakhtiari, president of the Public Investors Arbitration Bar Association, an organization of lawyers which represents investors in securities arbitration cases.

The brokerage's account-opening agreement requires its customers to arbitrate disputes instead of going to court, he said.

"But when it comes to an arbitration decision they don't like, they're the first to walk away," Bakhtiari said. "It's a pattern of bad behavior."

In Rote's case, Morgan Keegan claimed, among other things, that one of the arbitrators on the panel was biased because of his involvement in a prior Morgan Keegan case involving the money-losing bond funds.

Morgan Keegan also argued that the award did not adequately explain how the $400,000 -- only half the amount initially sought -- would be divided among the three claimants, which were Rote, his wife, and a trust, of which Rote is a trustee).

The brokerage, which was owned by Regions Financial Corp at the time that many of losses from the bond funds were incurred, is now being purchased by Raymond James Financial Inc .

Requests for comment from Morgan Keegan and Rote's lawyer were not immediately returned. Rote is a former professional soccer player and son of the NFL New York Giants football star Kyle Rote.