(Reuters) - Wall Street's industry-funded watchdog, FINRA, has notified Morgan Keegan & Co. that it will suspend the brokerage's license for not complying with an arbitration ruling in favor of retired basketball star Horace Grant unless the firm meets certain conditions, according to a letter reviewed by Reuters.
Morgan Keegan & Co., a unit of Raymond James Financial Inc., recently paid Grant $1.59 million in a bitter dispute dating back to 2008. But Grant's lawyer said the brokerage owes another $333,000 in interest.
"Morgan Keegan has paid in full the award rendered in the Grant arbitration proceeding," the brokerage said in a statement on Tuesday. The company's brokerage license is not in jeopardy, it said.
The notice from the Financial Industry Regulatory Authority, or FINRA, according to Morgan Keegan, is a standard response to a request on Friday from Grant's lawyer, Chicago-based Andrew Stoltmann, that FINRA suspend Morgan Keegan's license for non-payment of an arbitration award.
Grant, a former Chicago Bulls forward, won a total of $1.46 million in a FINRA arbitration ruling against Morgan Keegan in 2009. Grant had invested in a group of bond funds that lost nearly all of their value in 2008 during the financial crisis triggered by the bursting of the housing bubble and the collapse of the subprime mortgage market.
In June 2011, Morgan Keegan agreed to pay a fine of $200 million to settle fraud charges brought by the U.S. Securities and Exchange Commission, state regulators and FINRA in connection with the false valuation of subprime mortgage-backed securities in five funds.
Since 2009, Morgan Keegan has tried to overturn the Grant arbitration ruling in court. The case was ultimately heard by a federal appeals court in California, where Morgan Keegan lost in October.
The brokerage has 21 days to respond to FINRA's notice and may request a hearing, according to the letter from FINRA to Morgan Keegan's compliance officer. Morgan Keegan could be excused from having its license suspended if it pays the award in full, settles with Grant, or meets certain other conditions, according to the letter.
Morgan Keegan also intends to ask a court to determine if more interest is owed, it said in a statement. That would block further action by FINRA until the issue is resolved, the company said.
Reporting by Suzanne Barlyn; Editing by Jan Paschal