Morgan Keegan Hit For $9.2 Million In Houston Tx Case
Morgan Keegan, a unit of Regions Financial Corporation (NYSE:RF), was accused of a fraudulent scheme that the investors invest in the RMK High Income Fund, RMK Advantage Income Fund, RMK Multi-Sector Income Fund and RMK Strategic Income Fund. According to the award, the investors were induced to invest substantial portions of retirement and trust funds into unsuitable closed-end mutual funds with high levels of exposure to highly risky sub-prime mortgage assets and also advised to reinvest their dividends in the funds.
An arbitration panel agreed that Morgan Keegan engaged in fraud by inducing them to invest in the funds. In the largest award yet against embattled Morgan Keegan, a Financial Industry Regulatory Authority (FINRA) arbitration panel in Houston, TX ordered them to pay a group of investors $9.2 million. (FINRA# 09-00683; John Garrett, et al. v. Morgan Keegan & Company, Inc.).
Morgan Keegan has become the achilles’ heel of its parent company, Regions Financial Corporation (NYSE:RF), based in Birmingham, AL. Six RMK mutual funds managed and sold by Morgan Keegan to its customers lost roughly $2 billion in value from March 31, 2007 to March 31, 2008. Although depicted as being different, the performance of each fund was essentially the same, producing massive losses for investors who had been told the funds were safe. The result is Regions Financial Corporation's sixth loss in seven quarters caused by a $200 million charge on its balance sheet reflecting an "estimate of probable loss" from settlements with investors over the bond funds.