Last week, in an almost unprecedented manner, three groups of securities regulators ? the SEC, the Financial Industry Regulatory Authority (FINRA), and various state regulators ? almost simultaneously filed enforcement actions against Morgan Keegan for fraud arising out of its sales of 6 toxic bond funds. The regulatory investigations had been going on for several years. The allegations in the regulatory actions are quite serious and sound in egregious fraud.
On the same day, another Morgan Keegan arbitration award was issued in which investors seeking to recover losses of $1.5 million were awarded zero. How could this be? How could a situation in which all regulators agree that Morgan Keegan perpetrated a huge fraud result in an award of zero to an investor in a case arising out of the same fraud?
The answer is simple. Many arbitrators and arbitration panels have routinely denied investors access to many relevant and incriminating documents despite the investors’ repeated attempts to obtain them. Specifically, for the past several years, it has been well-known by the plaintiffs’ bar, and publicly acknowledged by Morgan Keegan, that Morgan Keegan was subject to an array of regulatory investigations and had produced thousands of documents to regulators. Investors have repeatedly tried to convince arbitrators to order that Morgan Keegan turn over these documents so that investors could get a fair hearing on the merits. In this regard, it should be noted that judges routinely order the production of such documents in court cases. While arbitrators in a few cases have ordered Morgan Keegan to produce these documents (cases that Morgan Keegan quickly settled), the vast majority has refused to do so. As a result, arbitration panels have routinely rendered awards on investors’ claims while denying the investors an opportunity to fully present the relevant facts.
In short, the refusal of many arbitrators and arbitration panels to grant investors access to clearly relevant documents has denied those investors a fair trial. Whether this occurred because of arbitrator uncertainty, ignorance or bias, it is an embarrassment to the arbitration process. If arbitration is to continue, then something should be done about these abuses.
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 35 occasions. Page Perry’s attorneys are actively involved in representing investors in Morgan Keegan cases. For further information, please contact us.