Feb 4 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 Jan. 29, posted to FINRA's website on
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