ETF News

Morgan Keegan to pay bond fund investors $9.2 mln

NEW YORK, Oct 6 (Reuters) - A FINRA arbitration panel ordered the Morgan Keegan brokerage to pay $9.2 million to 18 investors who lost money in its bond funds.

Morgan Keegan, a unit of Regions Financial Corp RF.N, was accused of inducing investors to invest in funds that were unsuitable given their high levels of exposure to risky "subprime" mortgage assets. Customers also alleged they were encouraged to reinvest dividends in the funds.

The $9.2 million award by the Financial Industry Regulatory Authority panel was the largest yet handed down against Morgan Keegan. The investors had asked for $10.5 million in damages.

All 18 investors were customers of Houston broker Russell Stein, a veteran who started his career at Merrill Lynch in 1969 and worked at Morgan Keegan from May 2001 until March 2008, according to FINRA records.

Stein currently works for Raymond James & Associates, a unit of Raymond James Financial Inc RJF.N.

On July 27, Regions Financial announced Morgan Keegan had recorded a $200 million charge to cover the probable costs of the bond fund litigation. (Reporting by Joseph A. Giannone; Editing by Tim Dobbyn)