Morgan Keegan & Co. and its affiliate, Morgan Asset Management, Inc. (“MAM”) have agreed to pay $200 million to settle fraud charges brought by the U.S. Securities and Exchange Commission and five states, including Kentucky. The Kentucky Department of Financial Institutions stated that more than 2,000 Kentucky investors sustained about $50 million in losses. $11 million in restitution will be paid to Kentucky investors.
This action is a direct result of intensive investigations led by regulators in Kentucky, Alabama, Mississippi, South Carolina and Tennessee in cooperation with several other states, along with the Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA).
The investigation centered around seven proprietary mutual funds sold by Morgan Keegan broker dealers to more than 30,000 account holders. Those seven mutual funds lost approximately $1.5 billion dollars from March 31, 2007, to March 31, 2008. The states’ joint administrative actions against Morgan Keegan, Morgan Asset Management, and certain employees, alleged that the firms:
- Made material omissions and misrepresentations in marketing materials,
- Made material omissions and misrepresentations in regulatory filings,
- Withheld information from and misrepresented information concerning the funds to the Morgan Keegan sales force,
- Provided preferential treatment to certain customers,
- Failed to make suitable recommendations concerning purchases and concentration of the funds in customer accounts,
- Failed to adequately supervise their employees, and
- Obstructed the due diligence process.
State securities regulators are continuing the cases and charges against Brian B. Sullivan, Gary S. Stringer and Michele F. Wood, who have not entered into the consent orders. James Kelsoe settled charges with the states and SEC and was ordered to pay $500,000, split equally between the states and SEC. To dismiss further charges, Kelsoe agreed to the revocation of all his existing registrations/licenses and an order of permanent bar from involvement in the securities industry. None of those four employees operated in Kentucky.
Charles C. Mihalek, P.S.C. is currently investigating auction rate securities sold by Morgan Keegan and other brokerage firms. If you believe you have been defrauded as a result of an investment in an auction rate security, please call us for a free consultation and case evaluation at (800) 294-9198 or contact us at firstname.lastname@example.org. For more information, go to mihaleklaw.com.