In a Texas securities case, FINRA arbitration panel has ordered Morgan Keegan & Co., a Regions Financial Corp., to pay 18 investors $9.2M for losses related to risky bond funds. The investors contend that the investment firm committed securities fraud when it convinced them to invest in certain funds that included high-risk “subprime” mortgage assets. Clients also claimed that they were persuaded to automatically reinvest dividends in the funds.
This is the biggest award that an arbitration panel has awarded in a Morgan Keegan case involving six bond funds that were heavily involved in mortgage-related holdings. The funds dropped in value significantly in 2007 and 2008. Hundreds of securities claims against the brokerage firm followed. Last July, Regions Financial announced that Morgan Keegan had recorded a $200M charge for probable costs of the bond fund lawsuits.
Arbitrators in Houston made the ruling in the Texas securities case. Included in the total sum was $1.1M in legal fees that, per state law, will be paid to investors. All of the investors involved were clients of Russell W. Stein, a Morgan Keegan broker. Stein is no longer with the broker-dealer. Regulatory filings indicate that he is currently employed with Raymond James Financial Inc. unit Raymond James & Associates Inc.
Stein and his wife were original claimants in this Texas securities fraud case. They too had invested in the bond funds. Their claims are now part of another case involving a group of other investors. Morgan Keegan is considering appealing the FINRA arbitration panel’s decision.
Related Web Resources:
Morgan Keegan to pay bond fund investors $9.2 mln, Reuters, October 6, 2010
Morgan Keegan Must Pay $9.2Mln To Investors – Panel, Wall Street Journal, October 6, 2010
Morgan Keegan Ordered by FINRA Panel to Pay Investor $2.5 Million for Bond Fund Losses, Stockbroker Fraud Blog, February 23, 2010
Morgan Keegan Again Ordered by Arbitrators to Pay Bond Fund Losses to Investors, Stockbroker Fraud Blog, October 27, 2009
Financial Industry Regulatory Authority
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