Another class-action lawsuit related to issues regarding the disclosure
of subprime debt obligations surfaced this week when the law firm of Chitwood, Harley, Harnes LLP filed against certain mutual funds offered by Morgan Keegan Select Fund Inc.
suit, filed in Tennessee, claims that several of Morgan Keegan’s funds
were invested in collaterized debt obligations (CDOs) that were backed
by subprime mortgages. The lawsuit, like many others related to
subprime debt obligations, claims investors who vested in the funds
were not made aware of the fund’s full exposure to the risky loans
until the loans faced greater deterioration in late 2007.
Morgan Keegan lawsuit claims, “the funds lacked adequate controls and hedges to
minimize the risk of loss from mortgage delinquencies which affected a
large part of their portfolios.” The plaintiffs also say “the funds’
portfolios were materially misstated due to their failure to properly
value CDOs; and the extent of the funds’ risk exposure to
mortgage-backed assets was misstated.”