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 December 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.
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.
(Reporting By Suzanne Barlyn; editing by John Wallace)