Morgan Keegan Agrees to Pay $210M Fine; Could Be Sold by Parent Firm

According to FINRA, the company will be making restitution to clients who invested in seven affiliated bond funds, including the Regions Morgan Keegan Select Intermediate Bond Fund (Intermediate Fund). The funds were managed by Morgan Keegan’s affiliate, Morgan Asset Management. Enforcement proceedings were brought not just by FINRA, but also by the SEC and five state regulators from Alabama, Kentucky, Mississippi, South Carolina and Tennessee.

FINRA determined that the company, from January 2006 through September 2007, marketed and sold the Intermediate Fund to investors using sales materials that contained exaggerated claims, failed to provide a sound basis for evaluating the facts regarding the fund, were not fair and balanced, and did not adequately disclose the impact of market conditions that caused substantial losses to the value of the Intermediate Fund.

As part of the settlement, Morgan Keegan and Morgan Asset Management agreed to pay $210 million, of which $200 million will be placed into two Fair Funds for the benefit of investors in the RMK Funds in any state. The five states will share $10 million in penalties.

Regions also announced that with these regulatory matters settled, and as part of its ongoing capital planning process, it has retained Goldman, Sachs & Co. to explore “potential strategic alternatives” for Morgan Keegan as Regions evaluates how best to manage its capital to increase shareholder value. (Morgan Asset Management and Regions Morgan Keegan Trust are not included in this review.)

“Morgan Keegan is excited by the opportunity to further develop the brand that we have built over the last 40 years,” said John Carson, CEO of Morgan Keegan, in a statement. “Morgan Keegan’s core businesses remain strong and, with this settlement behind us, we look forward to continuing to serve our individual, institutional and investment banking clients and to growing our business.”