Regions Financial Corporation

Raymond James Financial to Buy Morgan Keegan from Regions Financial for $930 Million

Published on: January 14, 2012 | by Shepherd Smith Edwards & Kantas, LLP

This week, Regions Financial Corp. (NYSE: RF) issued a statement announcing that Raymond James Financial Inc. (RJF) will be paying it $930 million to purchase Morgan Keegan & Company, Inc. and related affiliates in a stock purchase agreement. (Regions Morgan Keegan Trust and Morgan Asset Management, however, are not part of the sale.) Prior to closing, Morgan Keegan will pay Regions $250 million. This agreement, of course, will have to receiver regulatory approvals and meet closing conditions.

Also per the agreement:
• For all litigation matters connected to pre-closing activities, Regions will protect Raymond James against these losses. Meantime, Regions will benefit from already existing reserves by Regions at Morgan Keegan.

• Raymond James’ Public Finance and Fixed Income businesses will be headquartered in Memphis, Tennessee, which is also Morgan Keegan’s main base.

• Raymond James and Regions will become involved in a number of business relationships that will benefit both parties.

Regions placed Morgan Keegan on the market last June.

The sale is expected to close during the first quarter of 2012. This stock purchase agreement would allow Raymond James to grow its retail brokerage network, turning it into one of the largest firms in the US.

According to Regions, the deal would give it additional revenue opportunities, as a result of its solid partnership with Raymond James, for loan referrals, processing relationships, and deposits. The sale would also help Regions pay the federal government back some of the $3.5 billion that it received during the height of the economic crisis in 2008. However, Regions also anticipates a $575 million to $745 million impairment charge from the deal.

The Wall Street Journal says that to keep some Morgan Keegan management and financial advisers from leaving in the wake of the sale, Raymond James intends to offer up to $215 million in retention payments (restricted stock units and cash) as part of the acquisition deal. Already, a number of key Morgan Keegan employees have placed their signatures to employment contracts with Raymond James. The deal ups Raymond James headcount of financial advisers to 6000—a 60% increase and a 1000 more than prior to the deal. This will rank it third behind Morgan Stanley Smith Barney and just under Bank of America Corp.’s (BAC) Merrill Lynch.

It’s Official: Raymond James Buys Morgan Keegan, for $930 Million, The Wall Street Journal, January 11, 2012

Raymond James Said to Near $930 Million Purchase of Broker Morgan Keegan, Bloomberg, January 11, 2012

More Blog Posts:
Raymond James Must Pay $925,000 Over Auction-Rate Securities Dispute, Institutional Investor Securities Blog, September 1, 2010

Morgan Keegan & Company Ordered by FINRA to Pay $555,400 in Texas Securities Case Involving Morgan Keegan Proprietary Funds, Stockbroker Fraud Blog, September 6, 2011

Claims Filed Against Morgan Keegan Division of Regions Financial Causes Shortage of Arbitrators, Stockbroker Fraud Blog, February 8, 2010

Morgan Keegan Ordered by FINRA to Pay RMK Fund Investors $881,000

Published on: April 24, 2011 | by Shepherd Smith Edwards & Kantas, LLP

A Financial Industry Regulatory Authority arbitration panel is ordering Morgan Keegan to pay a group of investors $881,000 for losses they sustained in Morgan Keegan’s proprietary funds that were concentrated in high-risk subprime mortgage assets. Customers lost about $2 billion.

The Morgan Keegan funds that investors had placed their money in included the:
• RMK High Income Fund
• RMK Multi-Sector High Income Fund
• RMK Advantage Income Fund
• RMK Select Intermediate Bond Fund
• RMK Strategic Income Fund

The claimants alleged misrepresentations and omissions, unsuitable investments, breach of fiduciary duty, failure to supervise, negligence, vicarious liability, breach of contract, FINRA rule violations, and Securities and Exchange Act violations. The FINRA panel found Morgan Keegan liable to the claimants on a number of the claims and ordered the financial firm to pay the following in compensatory damages:

• $33,382 to Palmer and Kathy Albertine • $105,844 to Jon Albright • $254,642 to Susan and Sam Davis • $458,625 to Kendall and Peter Tashie
FINRA also ordered Morgan Keegan to pay $26,850 for all of the forum fees for the arbitration against the financial firm, $28,500 for the Claimaints’ expert witness fee, and $600 for the portion of the filing fee that is non-refundable. Morgan Keegan is a Regions Financial Corporation subsidiary.

Related Web Resources:
FINRA Rules

Securities and Exchange Act of 1934, Cornell University Law School
More Blog Posts:
Morgan Keegan & Co. Inc. Must Pay $250K to Couple that Lost Investments in Hedge Fund with Ties to Bernard L. Madoff Investment Securities, Stockbroker Fraud Blog, March 16, 2011
Morgan Keegan to Pay $9.2M to Investors in Texas Securities Fraud Case Involving Risky Bond Funds, Stockbroker Fraud Blog, October 6, 2010
Morgan Keegan & Co., Inc., Morgan Asset Management, and Two Employees Face Subprime Mortgage Securities Fraud Charges by SEC, Stockbroker Fraud Blog, April 8, 2010 Continue Reading ›

Morgan Keegan & Co. Inc. Must Pay $250K to Couple that Lost Investments in Hedge Fund with Ties to Bernard L. Madoff Investment Securities

Published on: March 16, 2011 | by Shepherd Smith Edwards & Kantas, LLP

Financial Industry Regulatory Authority says that Morgan Keegan & Co, Inc. must pay over $250,000 in punitive and compensatory damages to Jeffrey and Marisel Lieberman. The couple suffered financial losses after investing in Greenwich Sentry LLP, a hedge fund whose assets were funneled to Bernard L. Madoff Investment Securities. FINRA contends that the brokerage firm failed to due enough due diligence on the Madoff feeder fund, and was “grossly negligent.”

The Lieberman, who are accusing the Regions Financial unit of fraudulent misrepresentation, negligence breach of fiduciary duty, and violations of Florida and Tennessee statutes, claim that Morgan Keegan and Julio Almeyda, one of its registered representatives, invested $200,000 of their money with Greenwich Sentry. The fund ended up filing for bankruptcy last November.

Per Morgan Keegan’s internal compliance rules, investors should only be allowed to place money in hedge funds if “speculation” is one among their main objectives when opening an account. “Speculation” was the last objective on the couple’s list. FINRA says that not only must the broker-dealer repay the couple’s entire loss of $200,000, but also they must also give them 6% annual interest from when the investment was made, $50,000 in punitive damages, and $14,000 in expert witness fees.

Meantime, the FINRA panel cleared Almeyda of wrongdoing, finding that he did not know that Morgan Keegan had not provided sufficient due diligence nor was he aware that he had given the Lieberman’s false and misleading information about their investments’ risks.

Over the last year, Morgan Keegan has found itself dealing with hundreds of arbitration cases nvolving mutual fund investors alleging securities fraud related to the significant losses they sustained during the subprime mortgage crisis.

Related Web Resources:
Morgan Keegan Fined $250,000 Over Madoff Fund, Reuters, March 7, 2011

More Blog Posts:
Morgan Keegan to Pay $9.2M to Investors in Texas Securities Fraud Case Involving Risky Bond Funds, Stockbroker Fraud Blog, October 6, 2010
Morgan Keegan & Co., Inc., Morgan Asset Management, and Two Employees Face Subprime Mortgage Securities Fraud Charges by SEC, Stockbroker Fraud Blog, April 8, 2010
Morgan Keegan Ordered by FINRA Panel to Pay Investor $2.5 Million for Bond Fund Losses, Stockbroker Fraud Blog, February 23, 2010 Continue Reading ›

Morgan Keegan to Pay $9.2M to Investors in Texas Securities Fraud Case Involving Risky Bond Funds

Published on: October 6, 2010 | by Shepherd Smith Edwards & Kantas, LLP

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
Continue Reading ›

Morgan Keegan Ordered by FINRA Panel to Pay Investor $2.5 Million for Bond Fund Losses

Published on: February 23, 2010 | by Shepherd Smith Edwards & Kantas, LLP

A Financial Industry Regulatory Authority panel has ordered Morgan Keegan & Co. to pay investor Andrew Stein $2.5 million because the bond funds that he invested in had bet poorly on mortgage-related holdings. Panel members found Morgan Keegan liable for failure to supervise, negligence, and for selling investments that were unsuitable for Stein and his companies. The claimants, who sustained financial losses, had initially sought $12 million.

Stein’s arbitration claim is just one of over 400 securities claims that have been filed against Morgan Keegan over its bond funds that had invested in subprime-related securities, such as CDO’s (collateralized debt obligations). When the US housing market collapsed, the funds went down in value by up to 82%.

Stein contends that Morgan Keegan did not reveal the kinds of risks involved in investing in the bond funds. He and his companies claim that Morgan Keegan artificially increased the fund assets’ value so that the funds would appear more stable and investors wouldn’t be able to see the actual risks involved.

Claims Filed Against Morgan Keegan Division of Regions Financial Causes Shortage of Arbitrators

Published on: February 8, 2010 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority has had to bring in hundreds of additional arbitrators to deal with the approximately 400 securities fraud claims that investors have filed against Regions Financial Corp., the investment banking unit of Morgan Keegan & Co. Investors are seeking to recover $35 million after three of its mutual funds dropped in value by up to 82% when the housing market fell apart. The Region Financial Corp mutual funds contained subprime-related securities, including collateralized debt obligations, low-quality mortgages, and mortgage-backed securities.

Morgan Keegan claims that it notified investors of the risks associated with investing in the mutual funds. Regions says that to date, 79 arbitration cases have been heard. 39 of the cases were dismissed and 114 arbitration claims seeking $24 million were dropped before decisions were reached. The investment firm is putting up a tough fight against the complaints. So far, arbitrators have been awarded $7.6 million.

Because so many investors filed arbitration claims, FINRA has had to contact arbitrators in different parts of the US and ask them to come to the different cities where the hearings on the mutual funds are talking place. The average pool of arbitrators in each city is now approximately 721 persons. This is an increase from its previous average pool of 87 arbitrators.

Regions Bank Settles SEC Charges Over Latin American Investment Fraud Scam

Published on: September 24, 2009 | by Shepherd Smith Edwards & Kantas, LLP

Regions Bank has agreed to a $1 million fine to settle SEC allegations that it helped defraud some 14,000 investors. Most of the affected investors are based in Latin America.

According to the SEC, Regions Bank helped two unregistered broker-dealers, U.S. College Trust Corp. and U.S. Pension Trust Corp., commit securities fraud against Latin American investors.

Beginning October 2001, Regions Bank played the role of “trustee” to the broker-dealers’ investment plans. It continued to accept USPT clients until January 2008. The SEC contends that this affiliation with a US bank gave the securities fraud scheme an aura of “legitimacy” and became a big draw for Latin American investors.

The SEC says that by taking on the role of trustee, Regions Bank formed individual trust relationships with investors, processed client contributions, and bought mutual funds on their behalf.

Investor had the option of paying one lump sum or making yearly contributions. Investors were not notified until March 2006 that USPT deducted substantial chunks of investors’ contributions-up to 85% of initial contributions made by investors who took part in an annual plan and up to 18% of single contributions-and used the money to pay for commissions and other fees.

The SEC says that Regions Bank either knew or should have known about USPT’s deceptive sales practices. The Commission is accusing Regions Bank of dispatching representatives to Latin America to meet prospective investors and allowing USPT to use the bank’s name in marketing and promotional materials.

The $1 million penalty will be placed in a Fair Fund to compensate investment fraud victims. Regions bank has also agreed to a cease-and-desist order.

SEC charges Regions Bank for role in Latin American fraud scheme, Investment News, September 21, 2009
Read the SEC Complaint (PDF)
Continue Reading ›

Stockbroker Fraud Law Firm Shepherd Smith Edwards & Kantas LTD LLP Files Claims Against Morgan Keegan Following SEC Wells Notice

Published on: July 16, 2009 | by Shepherd Smith Edwards & Kantas, LLP

Last week, the Staff of the Atlanta Regional Office of the US Securities and Exchange Commission sent Morgan Keegan & Co, Inc., Morgan Asset Management, Inc., and three employees a “Wells” notice. The notice stated the Staff’s intention to recommend that the Commission bring enforcement actions over possible federal securities laws violations. Morgan Keegan, is a subsidiary of Regions Financial Corporation.

The Staff had been investigating a number of mutual funds that Morgan Asset Management had previously managed. In light of the Wells notice, the securities fraud law firm of Shepherd Smith Edwards & Kantas LTD LLP is continuing to file arbitration claims against Morgan Keegan for covering up the risks associated with their bond funds.

Our investor clients are accusing Morgan Keegan of selling specific funds that it promoted as relatively conservative investments when in fact, the funds were exposed to subprime mortgage securities, collateral debt obligations, and other high risk debt instruments. Investors are alleging that Morgan Keegan took part in a scam that defrauded investors of certain bond funds while misrepresenting their degree of involvement in more high risk investments. As a result, our investor clients suffered major financial losses after the subprime mortgage market collapsed.