Morgan Keegan wins in $9.6 million case filed by Memphis nonprofit
(Reuters) - A Memphis-based nonprofit group that claimed Morgan Keegan & Co misrepresented a money-losing bond fund has lost a $9.6 million securities arbitration case against the brokerage, according to a ruling.
The Urban Child Institute, an organization that promotes wellness programs for young children, filed the case against Morgan Keegan, a unit of Raymond James Financial Inc, in 2009, alleging civil fraud, misrepresentation and the sale of unsuitable investments, among other things, according to a securities arbitration panel ruling.
One of the three Financial Industry Regulatory Authority arbitrators who heard the case signed a dissent objecting to the ruling. That could help the nonprofit if it asks a court to throw out the ruling - an unusual move that rarely succeeds, say lawyers. The ruling, dated January 29, posted to FINRA's website on Monday.
A representative for the Urban Child Institute, which sought more than $9.6 million in the case, could not be immediately reached for comment. The group's lawyer did not immediately return a phone call requesting comment.
The fund was among a group of bond funds that dropped as much as 80 percent in 2008. Morgan Keegan agreed to pay $200 million in 2011 to settle civil regulatory charges involving the funds. The brokerage 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.
Morgan Keegan was inundated by more than 1,000 cases related to the funds. Some of those cases are still winding through FINRA's arbitration process. Outcomes in the cases have varied wildly, with investors winning in some but not others.
Raymond James, which acquired the brokerage from Regions Financial Corp in 2012, recently announced that it plans to retire the Morgan Keegan name in mid-February.
A Raymond James spokesman declined to comment. A spokesman for Regions, which remains financially responsible for the bond fund litigation, also declined to comment.
The arbitrators did not provide reasons for their decision, or for the dissent, as is typical of most FINRA arbitration rulings.
(Reporting by Suzanne Barlyn in New York; editing by Matthew Lewis)