Morgan Keegan has been aggressively fighting an array of regulatory actions and investor claims. As a result of these “hardball” defense tactics, Morgan Keegan’s legal costs have doubled and are consuming a significant chunk of the firm’s revenue as a result of investigations by securities regulators and legal actions by aggrieved investors, according to an Feb. 25 article in InvestmentNews by Bruce Kelly.
Legal expenses reportedly equaled 12% of the firm’s total revenue in 2009, more than twice as much as in 2008. Morgan Keegan spent $161 million in “professional and legal fees” last year on revenue of $1.28 billion, versus $90 million on such fees and $1.34 billion in revenues for 2008, according to the article.
The legal expenses were reported Tuesday in the annual report of Regions Financial Corp., which owns Morgan Keegan.
A spokesman for Regions Financial, Tim Deighton, refused to comment.
Morgan Keegan is not alone. Raymond James Financial Inc. has reportedly reserved (but not spent) $186.4 million for loan loss, legal proceedings, bad debts and other accruals in 2009, compared with $68.8 million the year before. But Raymond James has four times as many brokers and advisers as Morgan Keegan.
Morgan Keegan is fighting a rising tide of investor arbitrations flowing from its RMK bond funds that were loaded with highly leveraged, exotic mortgage-backed securities, collateralized debt obligations and other structured finance products. Some of those funds have lost 95% of their value since mid-2007.
This month alone, Morgan Keegan lost separate claims with awards of a $2.5 million and $1.1 million, according to the article.
Last summer, both the Securities and Exchange Commission and the Financial Industry Regulatory Authority Inc. issued Wells notices to Morgan Keegan, a step signaling that enforcement actions against Morgan Keegan have been recommended in connection with the bond funds. The SEC also filed a Wells notice over Morgan Keegan’s sale of auction-rate securities.
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 Morgan Keegan cases. For further information, please contact us.