Morgan Keegan’s problems seem to keep growing. Already facing massive claims over its sale of toxic bond funds, the company is now being confronted with auction rate securities problems. According to an article published by Reuters, the SEC may begin a civil proceeding against the Morgan Keegan & Co brokerage unit of Regions Financial Corp. over the alleged improper sale of auction-rate securities.
A quarterly report filed by Regions disclosed that the SEC filed a “Wells Notice” in March against Morgan Keegan. A “Wells Notice” indicates that a civil action is possible and gives the party who is the subject of the notice an opportunity to prepare a defense to the claims.
According to the Reuters article, Morgan Keegan indicated that the SEC is investigating the adequacy of Morgan Keegan’s disclosures of liquidity risks associated with the purchase of auction-rate securities as well as whether Morgan Keegan sold large amounts of auction-rate securities after its ability to support the auctions was diminished.
Auction-rate securities are long-term bonds with interest rates that were to reset through periodic auctions. In February of 2008, the $330 billion auction-rate securities market collapsed when the firms underwriting the issues ceased supporting the auctions, causing the periodic auctions to fail. As a result, the securities that were sold in the marketplace as a cash equivalent became completely illiquid and the holders of the securities could not sell them at the auctions. It is estimated that over 100 billion dollars of the toxic securities are still being held by investors. Investors still holding these securities should be encouraged to consult attorneys with expertise in the matter to discuss their case and options.
Page Perry is an Atlanta-based law firm with over 125 years collective experience representing investors in securities-related litigation and arbitration. While past results are not indicative of future success, Page Perry’s attorneys have recovered over $1,000,000 for clients on more than 30 occasions. Page Perry’s attorneys are actively involved in representing institutional and corporate investors in auction-rate securities cases. For further information, please contact us.