Regions likely to keep Morgan Keegan despite lawsuits

posted on:
August 17, 2009



A recent report in the Memphis Business Journal predicts Regions Financial Corp. will hold onto its Morgan Keegan investment arm, despite a number of lawsuits filed in the past year as a result of alleged investment fraud, and more pending. Lawsuits content that risky funds brokered by Regions Morgan Keegan tied to the subprime lending market were represented to investors as low-risk. As a result, the suits allege, individuals and organizations invested in the funds suffered significant financial losses, almost overnight, when the mortgage market collapsed.

Funds named in the lawsuits include Select Intermediate Bond Fund (MKIBX) and the Select High Income Fund (RHIIX). In July 2008, management of several affected funds was changed from Regions Financial to Hyperion Brookfield Asset Management. Then, in December 2008 seven former Regions Morgan Keegan investment funds changed their names to reflect the new management, with each fund now starting with Helio, Hyperion’s brand name.

Regions Morgan Keegan lawsuits are being reviewed by Financial Industry Regulatory Authority (FINRA) arbitration panels, which have thus far sided with investors against the investment company across the board. In an unusual move, earlier this month Morgan Keegan & Co. filed for appeal on three recent arbitration rulings against it. In most cases of arbitration, awards are usually binding, with parties only allowed to appeal when arbitrators clearly ignore established laws. The appeal delays settlement for three investors, including a non-profit organization that distributes Bibles to prisoners and their families. The appeal could extend these cases for as much as two years.

Despite its almost wholly unsuccessful showing in arbitration, and a pile of pending legislation against it, the Business Journal says it is unlikely Regions will cut loose its Morgan Keegan arm. Financial experts opined that keeping the troubled investment broker is still a good long-term investment for Regions, adding to the diversity of the financial company’s portfolio.

However, the report says Regions investors are getting antsy, and putting pressure on company leaders to unload Morgan Keegan. With the recent appeal, which puts stockholders on the hook for additional legal costs, and more lawsuits on the horizon, shareholders are losing patience with promises of a return on this particular investment.

Beasley Allen attorneys have filed and continue to evaluate cases related to Regions Morgan Keegan investment funds and other investment fund fraud. For more information, visit our Morgan Keegan Investment Fraud web site.

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