* Morgan Keegan ordered to pay over $250,000 to couple
* Invested clients' entire account in Madoff feeder fund
* Failed to do adequate due diligence on fund-FINRA panel
(Adds information on panel's findings of due diligence
By Helen Kearney
NEW YORK, March 7 A Financial Industry
Regulatory Authority arbitration panel has ordered Morgan
Keegan to pay more than $250,000 to a Florida couple after the
firm invested all of their portfolio in a hedge fund that
channeled its money to Bernard L. Madoff Securities.
The arbitration panel found that Morgan Keegan, a unit of
Regions Financial Corp (RF.N), failed to do adequate due
diligence on Greenwich, Connecticut-based Greenwich Sentry LP,
which was a feeder fund for Madoff.
Morgan Keegan clients Jeffrey and Marisel Lieberman
invested their entire account of $200,000 in the fund, which
filed for bankruptcy in November 2010.
"There is clear and convincing evidence that ... Morgan
Keegan was grossly negligent in not performing substantial due
diligence and as a result it fraudulently misrepresented the
risk of this investment," the panel wrote.
The panel ordered Memphis, Tennessee-based Morgan Keegan to
repay the Liebermans their $200,000 investment, plus 6 percent
annual interest from when the investment was made in May 2007.
The firm was also ordered to pay $50,000 in punitive damages
and $14,000 for expert witness fees.
"We are very pleased with the decision," said Barbara
Riesberg, the Liebermans' lawyer. "My clients got everything we
A Morgan Keegan spokeswoman said the firm disagreed with
the panel's findings and planned to appeal the award.
The panel said that under Morgan Keegan's internal
compliance rules, clients should not be invested in hedge funds
unless they list "speculation" as one of their primary
investment objectives when they open an account. The Liebermans
had listed speculation as their last investment objective.
Morgan Keegan did very little due diligence on the fund,
failing to request an audited report of Madoff's firm or to
even do a basic Internet search on the fund, the panel said.
The Liebermans' financial adviser, Julio Almeyda, was
cleared of wrongdoing and the panel recommended that references
to the case be removed from his registration records. The panel
found that Almeyda was not aware of the lack of due diligence
performed by his firm and did not know that the information he
gave to the Liebermans about the riskiness of the investment
was false and misleading.
Morgan Keegan has faced hundreds of arbitration proceedings
over the past year from clients who had invested in mutual
funds that lost more than 50 percent of their value from
exposure to subprime mortgage debt.
(Reporting by Helen Kearney; Editing by Richard Chang, Maureen
Bavdek and Bernard Orr)