Dec 19 Morgan Keegan & Co must pay an investor
nearly $1.4 million in damages and other relief for losses tied
to a series of troubled bond funds, an arbitration panel ruled.
The Texas-based investor and a family limited partnership he
owns alleged that Morgan Keegan misrepresented a fund they
bought as "safe as conservative," according to a ruling by a
Financial Industry Regulatory Authority arbitration panel. Other
allegations included breach of contract and civil fraud.
The investor filed the case in 2010, requesting $4.3 million
in damages, according to the ruling, dated Monday. The $1.4
million award includes $851,000 in compensatory damages,
$400,000 in legal fees and other relief.
When the case was filed, Morgan Keegan was a unit of Regions
Financial Corp, which remains financially responsible for
the bond fund litigation. Morgan Keegan became a unit of Raymond
James Financial Inc in April.
The Morgan Keegan fund at issue was among a group that
dropped as much as 80 percent in 2007 and 2008. Federal and
state regulators accused Morgan Keegan of inflating the value of
mortgage-backed securities in the funds just as the housing
market was collapsing in 2007. Morgan Keegan agreed to pay a
$200 million fine to regulators in 2011.
On Dec. 10 the Securities and Exchange Commission filed
civil charges against the funds' former board members, including
one of Morgan Keegan's founders, Allen Morgan Jr, accusing them
of failing to oversee the funds' managers. [ID: nL1E8NA3QE]
Morgan Keegan was inundated by more than 1,000 cases related
to the funds. Some of those cases are still winding through the
FINRA arbitration process.
The arbitration process has led to inconsistent results for
investors and the brokerage. For example, an arbitration panel
last week ruled against a Washington-based company and the
estate of its former chief executive who had filed a $3.2
million claim against Morgan Keegan related to fund losses.
Arbitrators did not include reasons for their decisions in
either case, as is typical of FINRA arbitration rulings.
Spokesmen for Raymond James and for Regions were not
immediately available for comment.