Investors lose $1.9 million bond fund case against Morgan Keegan
(Reuters) - Morgan Keegan & Co has prevailed against a group of investors who filed an arbitration claim against the brokerage seeking more than $1.9 million in damages for losses tied to a series of troubled bond funds.
The investors, which include two trusts and a family limited partnership, filed the claim against Morgan Keegan in 2010. They alleged gross negligence, misrepresentation and that the Memphis-based brokerage sold unsuitable investments, among other things, according to a securities arbitration ruling. They also sought punitive damages.
Morgan Keegan is now a unit of Raymond James Financial Corp.
A Financial Industry Regulatory Authority arbitration panel in Boca Raton, Florida, denied the investors' claim, according a ruling dated Monday. The arbitrators, as is typical, did not explain the reasons for their decision.
The Morgan Keegan funds at issue in the case were among a group that dropped as much as 80 percent in 2008. Morgan Keegan agreed to pay a $200 million regulatory fine to settle enforcement actions by regulators related to the funds.
Morgan Keegan was accused by federal and state regulators of inflating the value of mortgage-backed securities in the funds just as the housing market was collapsing in 2007.
The brokerage was inundated by more than 1,000 cases related to the funds. Some of those cases are still winding through the FINRA arbitration process. Regions Financial Corp., which owned Morgan Keegan at the time of the fund debacles, remains financially responsible for those cases despite Morgan Keegan's acquisition by Raymond James.
Spokesmen for Raymond James and Regions declined to comment, as did a lawyer for the investors in the case.
Arbitration awards are typically binding. Parties, however, can ask courts to overturn arbitration rulings in unusual situations, such as when an arbitrator is biased, although courts rarely overturn arbitration awards.
Morgan Keegan has filed court cases in attempts to overturn numerous rulings in favor of investors related to the bond fund losses. Last month, the U.S. Court of Appeals for the 5th Circuit reinstated a $9.2 million ruling on behalf of a group of Morgan Keegan bond fund investors after a federal district court threw it out.
(Reporting by Suzanne Barlyn; Editing by Dan Grebler)