A recent ruling by a judge overturning a $9.2 million award in Morgan Keegan’s favor isn’t likely to give parent company Regions Financial much upside as it looks to sell the brokerage firm, experts say. Furthermore, the anti-client nature of the decision could make Morgan Keegan look less desirable to potential purchasers, according to recruiter Rick Peterson of Rick Peterson & Associates in Houston.
Houston U.S. District Court Judge Lynn Hughes on Sept. 30 threw out a 2010 ruling by a Financial Industry Regulatory Authority arbitration panel that required Morgan Keegan to pay $9.2 million to a group of investors for losses tied to some of its troubled bond funds, Reuters reported Friday. The judge disputed the testimony of a key witness, but investors’ lawyers said they would appeal the decision.
“Yes, this may be a temporary or permanent victory for Morgan Keegan,” said Peterson in an interview with AdvisorOne. “But it also is likely to anger investors, brokers and others, in my opinion. And thus the value of the franchise deteriorates making it an enormous defeat.”
In June, after regulators announced a settlement of roughly $200 million with Morgan Keegan over civil-fraud charges brought by the SEC related to sales of subprime-mortgage securities, Regions hired Goldman Sachs to help it find a buyer for the brokerage firm.
“This [latest ] headline seems to convey the message ‘Morgan Keegan wins again over clients,’ and what kind of message is that for Morgan Keegan and its potential buyers?” asked Peterson. “Yes, they may save $9.2 million. But this is really about the overall situation and the fact that Morgan Keegan had to fight these lawsuits in the first place, I believe.”
Regions Financial declined to comment on the recent ruling and sale of the brokerage firm, and Morgan Keegan did not return a request for comment by press time. The broker-dealer includes about 1,200 advisors with a total of $80-plus billion in assets under management.