Morgan Keegan Settles Fraud Charges and Agrees to Pay $200 Million

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.

Read the full Press Release from the Kentucky Department of Financial Institutions here, and investors can find more information here.

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  For more information, go to


Protect Yourself: A Primer on Financial Fraud and Abuse Against Seniors

Financial fraud is a growing threat against seniors.  It’s important to know what to look for and how to protect yourself against financial fraud and abuse.  For some tips and suggestions, download and read Protect Yourself: A Primer on Financial Fraud and Abuse Against Seniors.  It’s free, and provides some useful information on how to protect yourself or your loved ones from unscrupulous stockbrokers and financial professionals who may be recommending unsuitable or risky investments or even perpetrating a scam.

Report Senior Financial Fraud to Your State Financial Regulator

Don’t be afraid to contact your state financial regulators.  Every state has a state agency devoted to protecting the its citizens from financial fraud and abuse.  You can find a list of state legislators below.  Contact your state’s financial regulator if you suspect you’ve been targeted as part of a financial scam.

Alabama Securities Commission
RSA Plaza 770 Washington Ave., Suite 570
Montgomery, AL 36130-4700
Phone: (334) 242-2984 or (800) 222-1253
Fax: (334) 242-0240 

Alaska Department of Community and Economic Development
The Division of Banking, Securities and Corporations
150 Third Street, Room 217
P.O. Box 110807
Juneau, AK 99811-080
Phone: (907) 465-2521
Fax: (907) 465-2549 

Arizona Corporation Commission
Securities Division
1300 West Washington St., Third Floor
Phoenix, AZ 85007
Phone: (602) 542-4242
Fax: (602) 594-7470 

Arkansas Securities Department
Heritage West Building
201 East Markham, Room 300
Little Rock, AR 72201
Phone: (501) 324-9260
Fax: (501) 324-9268 

California Department of Corporations
Securities Regulation Division
320 West 4th Street Suite 750
Los Angeles, CA 90013-1105
Phone: (213) 576-7643
Fax: (213) 576-7182 

Colorado Division of Securities
1580 Lincoln St., Suite 420
Denver, CO 80203-1506
Phone: (303) 894-2320
Fax: (303) 861-2126 

Connecticut Department of Banking
Securities Division
260 Constitution Plaza
Hartford, CT 06103-1800
Phone: (860) 240-8230 or (800) 831-7225
Fax: (860) 240-8295 

Delaware Division of Securities
Department of Justice
820 North French St., 5th Floor
Carvel State Office Building
Wilmington, DE 19801
Phone: (302) 577-8424
Fax: (302) 577-6987 

District of Columbia
The Department of Insurance and Securities Regulation
810 First Street NE, Suite 701
Washington, D.C. 20002
Phone: (202) 727-8000
Fax: (202) 535-1199 

Florida Office of Comptroller
Department of Banking
101 East Gaines Street Plaza Level, The Capitol
Tallahassee, FL 32399-0350
Phone: (850) 410-9805
Fax: (850) 681-2428 

Georgia Office of the Secretary of State
Division of Securities and Business Regulation
Two Martin Luther King Jr. Drive SE 802 West Tower
Atlanta, GA 30334
Phone: (404) 656-3920
Fax: (404) 651-6451 

Hawaii Department of Commerce & Consumer Affairs
1010 Richards Street, 2nd Floor
P.O. Box 40
Honolulu, HI 96810
Phone: (808) 586-2744
Fax: (808) 586-2733 

Idaho Department of Finance
Securities Bureau
West State Street, 2nd Floor
P.O. Box 83720
Boise, ID 83720-0031
Phone: (208) 332-8004
Fax: (208) 332-8099 

Illinois Office of the Secretary of State
Securities Department
17 North State Street, suite 1100
Chicago, IL 60601
Phone: (312) 793-3384
Fax: (312) 793-1202

Springfield Office:
520 South Second Street Suite 200
Lincoln Tower
Springfield, IL 62701
Phone: (217) 782-2256
Fax: (217) 524-2172 

Indiana Office of the Secretary of State
Securities Division
302 West Washington St. Room E-111
Indianapolis, IN 46204
Phone: (317) 232-6681 or (800) 223-8791
Fax: (317) 233-3675 

Iowa Insurance Division
Securities Bureau
330 Maple St.
Des Moines, IA 50319-0065
Phone: (515) 281-5705
Fax: (515) 281-3059 

Kansas Office of the Securities Commissioner
618 S. Kansas Ave., 2nd Floor
Topeka, KS 66603-3804
Phone: (785) 296-3307 or (800) 232-9580
Fax: (785) 296-6872 

Kentucky Department of Financial Institutions
Division of Securities
1025 Capital Center Drive, Suite 200
Frankfort, KY 40601
Phone: (502) 573-3390 or (800) 223-2579
Fax: (502) 573-8787 

Louisiana Securities Commission
3445 North Causeway Blvd., Suite 509
Metairie, LA 70002
Phone: (504) 846-6970 

Maine Department of Professional and Financial Regulation
Securities Division
121 State House Station
Augusta, ME 04333-0121
Phone: (207) 624-8551
Fax: (207) 624-8590 

Maryland Office of the Attorney General
Division of Securities
200 St. Paul Place, 20th Floor
Baltimore, MD 21202-2020
Phone: (410) 576-6360
Fax: (410) 576-6532 

Massachusetts Secretary of the Commonwealth
Securities Division One Ashburton Place, 17th Floor
Boston, MA 02108
Phone: (617) 727-3548 or (800) 269-5428
Fax: (617) 248-0177 

Michigan Office of Financial and Insurance Services
Division of Securities Ottawa Building, 2nd Floor
611 W. Ottawa Street
P.O. Box 30701 Lansing, MI 48909-8201
Phone: (877) 999-6442
Fax: (517) 335-4978,1607,7-154-10555—00.html 

Minnesota Department of Commerce
Securities Division
85 Seventh Place East, Suite 500
St. Paul, MN 55101-2198
Phone: (651) 296-4026
Fax: (651) 296-4328

Mississippi Secretary of State
Office Business Regulation and Enforcement Division
202 N. Congress Street Suite 601
P.O. Box 136 Jackson, MS 39205
Phone: (800) 804-6364
Fax: (601) 359-2663 

Missouri Office of the Secretary of State
Securities Division
Missouri State Information Center
600 West Main Street
Jefferson City, MO 65101
Phone: (573) 751-4136
Fax: (573) 526-3124 

Montana Office of the State Auditor
Securities Department
840 Helena Avenue
P. O. Box 4009
Helena, MT 59604-4009
Phone: (406) 444-2040 or (800) 332-6148
Fax: (406) 444-5558 

Nebraska Department of Banking and Finance
Bureau of Securities
1200 N Street, Suite 311
P.O. Box 95006
Lincoln, NE 68509-5006
Phone: (402) 471-3445 

Nevada Secretary of State
Securities Division
555 E. Washington Ave. 5th Floor, Suite 5200
Las Vegas, NV 89101
Phone: (702) 486-2440 or (800) 758-6440
Fax: (702) 486-2452

Reno Office:
Securities Satellite Office
1755 East Plumb Lane Suite 231
Reno, Nevada 89502
Phone: (775) 688-1855
Fax: (775) 688-1858 

New Hampshire Bureau of Securities Regulation
State House, Room 204
Concord, NH 03301-4989
Phone: (603) 271-1463 or (800) 994-4200
Fax: (603) 271-7933 

New Jersey Department of Law and Public Safety
Bureau of Securities Gibraltar Building
153 Halsey St., 6th Floor
P.O. Box 47029
Newark, NJ 07101
Phone: (973) 504-3600
Fax: (973) 504-3601 

New Mexico Regulation and Licensing Department
Securities Division
725 St. Michaels Drive
Santa Fe, NM 87505-7605
Phone: (505) 827-7140
Fax: (505) 984-0617 

New York Office of the Attorney General
Investor Protection
Securities Bureau
120 Broadway, 23rd Floor
New York, NY 10271
Phone: (212) 416-8000
Fax: (212) 416-8816 

North Carolina Department of the Secretary of State
Securities Division
300 North Salisbury St.
P.O. Box 29622
Raleigh, NC 27626-0622
Phone: (919) 733-3924 or (800) 688-4507
Fax: (919) 821-0818 

North Dakota Securities Commissioner
State Capitol Building, 5th Floor
600 East Boulevard Ave.
Bismarck, ND 58505-0510
Phone: (701) 328-2910 or (800) 297-5124
Fax: (701) 255-3113 

Ohio Division of Securities
77 South High St., 22nd Floor
Columbus, OH 43215
Phone: (614) 644-7381 or (800) 788-1194
Fax: (614) 466-3316 

Oklahoma Department of Securities
First National Center, Ste 860
120 North Robinson
Oklahoma City, OK 73102
Phone: (405) 280-7700
Fax: (405) 280-7742 

Oregon Department of Consumer and Business Services
Division of Finance and Corporate Securities
350 Winter Street NE, Room 410
Salem, OR 97301-3881
Phone: (503) 378-4140
Fax: (503) 947-7862 

Pennsylvania Securities Commission
Harrisburg Office:
Eastgate Office Building, 2nd Floor
1010 North Seventh Street
Harrisburg, PA 17102-1410
Phone: (717) 787-8061
Fax: (717) 783-5122

Philadelphia Office:
1109 State Office Building
Philadelphia, PA 19130-4088
Phone: (215) 560-2088
Fax: (215) 560-3977

Pittsburgh Office:
806 State Office Building
Pittsburgh, PA 15222-1210
Phone: (412) 565-5083
Fax: (412) 565-7646 

Rhode Island Department of Business Regulation
Securities Division 233 Richmond St., Suite 232
Providence, RI 02903-4232
Phone: (401) 222-3048
Fax: (401) 222-5629 

South Carolina Office of the S.C. Attorney General
Securities Division
Rembert C. Dennis Office Building
1000 Assembly Street
P.O Box 11549
Columbia, SC 29211-1549
Phone: (803) 734-9916 

South Dakota Division of Securities
Capitol Building
118 West Capitol Ave.
Pierre, SD 57501
Phone: (605)-773-4823
Fax: (605)-773-5953 

Tennessee Department of Commerce and Insurance
Securities Division
500 James Robertson Pkwy. Suite 660
Nashville, TN 37243
Phone: (615) 741-1900
Fax: (615) 532-8375  

Texas State Securities Board
Rusk Building
208 East 10th Street, 5th Floor
P.O. Box 13167
Austin, Texas 78711-3167
Phone: (512) 305-8300
Fax: (512) 305-8310 

Utah Division of Securities 1
60 East 300 South, 2nd Floor
P.O. Box 146760
Salt Lake City, Utah 84114-6760
Phone: (801) 530-6600
Fax: (801) 530-6980  

Vermont Department of Banking, Insurance, Securities and Health Care
Securities Division
89 Main St., Drawer 20
Montpelier, VT 05620-3101
Phone: (802) 828-3420 

Virginia State Corporation Division
Division of Securities and Retail Franchising
Tyler Building, 9th Floor
1300 E. Main St.
P.O. Box 1197
Richmond, Virginia 23218
Phone: (804) 371-9051
Fax: (804) 371-9911 

Washington Department of Financial Institutions
Securities Division
General Administration Building, Room 300
210 11th Ave SW
PO Box 9033
Olympia, WA 98507-9033
Phone: (360) 902-8760
Fax: (360) 586-5068 

West Virginia Office of the State Auditor
Securities Division
State Capitol Building 1, Room W-100
Charleston, WV 25305
Phone: (304) 558-2257
Fax: (304) 558-4211 

Wisconsin Department of Financial Institutions
Division of Securities
345 West Washington Ave.
P.O. Box 1768
Madison, WI 53701-1768
Phone: (608) 266-1064
Fax: (608) 256-1259 

Wyoming Secretary of State
Securities Division
State Capitol Building
Cheyenne, WY 82002
Phone: (307) 777-7378
Fax: (307) 777-6217

Some Resources for Seniors Who Believe They May Be Victims of Financial Fraud

If you suspect that you are a victim of financial or securities fraud, you should contact your state securities regulator or an attorney.  The links below also contain a wealth of information that can educate you on how to avoid becoming a victim of financial fraud.

National Committee for the Prevention of Elder Abuse (NCPEA)

National Center on Elder Abuse

SEC for Seniors

Top Ten Things You Should Do Before Investing (Video)

The SEC warns on Affinity Fraud

FINRA: Understanding Professional Designations

FINRA: Scam Meter

FINRA: Risk Meter

National Criminal Justice Reference Service, Special Feature: Elder Abuse – Fraud and Financial Abuse

We’ll be updating our list of links periodically.  If you have any suggestions or would like to submit a link, please contact us.

Beware Reverse Mortgages

Reverse mortgages are a legitimate way to withdraw equity from your home.  These types of mortgages are better known as “home equity conversion mortgages” (HECMs).  Proper HECMs are insured by the Federal Housing Authority (FHA) and created so that people 62 years and older can take out the equity in their principal residence without having to make monthly payments.   Reverse mortgage scams often target seniors as unwitting pawns in a flipping scheme or simply charge seniors huge fees by an “advisor” who really just passes on the standard paperwork in a HECM loan.

If you are seeking out a reverse mortgage, find a reputable mortgage broker first.  Contact your regular banker or financial advisor for a second opinion.  Be cautious if someone approaches you with a plan that will either have you living in a new home rent-free or receiving monthly payments for a home you don’t own… it’s probably a scam.

You can find more information about reverse mortgages at the U.S. Department of Housing and Urban Development (HUD).

The Financial Industry Regulatory Authority (FINRA) has issued a very informative investor alert, Reverse Mortgages: Avoiding a Reversal of Fortune, which can be found here.




FINRA Cites Elder Abuse in Decision

In a January 2010 arbitration, the Financial Industry Regulatory Authority (FINRA) panel awarded an elderly investor, David Wolfson, $1.6 million in a case involving StockCross Financial Services Inc. of Beverley Hills, Calif. Mr. Wolfson accused StockCross, along with two of its brokers, of misconduct and self dealing.  According to Mr. Wolfson, the brokers recommended and solicited unsuitable and overly risky investments that were actively traded on margin.  His claim also alleged that StockCross and the two brokers, Thomas B. Cooper and Peter L. Boorn, put Mr. Wolfson’s home at risk by encouraging him to leverage the equity in his home with a reverse-mortgage transaction to utilize as investment capital.

While many arbitration claims charge elder abuse, it is extremely rare for a FINRA panel to cite such abuse in an award.  Under California law, elder abuse entitles plaintiffs triple the damages.  According to the complaint, Mr. Wolfson was a client of Mr. Cooper for almost 20 years before Mr. Cooper dropped the account in 2008.

A footnote to the lawsuit alleged that Mr. Cooper “quit because he had bilked nearly all of Mr. Wolfson’s assets—including the equity in his home, all his cash reserves, all his emergency/medical cash reserves and even the insurance money Mr. Wolfson received to replace his automobile—and there was nothing left to churn.”  The arbitrators awarded Mr. Wolfson $320,000 in compensatory damages and $960,000 in damages for elder abuse. They also awarded the 95-year-old $234,000 in legal fees, expert witness fees of $62,000, various costs of $21,000. Read the full award here.