In two recently decided arbitrations against Morgan Keegan related to its collapsed bond funds, the investors were awarded over $3.6 million, according to an article by Christopher Sheffield in the Memphis Business Journal, “Morgan Keegan pays out $3.6 million in February.”
On February 19, 2010, a Florida Financial Industry Regulatory Authority (FINRA) arbitration panel awarded Andrew M. Stein, Stein Holdings, Inc., and Stein Investments, LLC $2.5 million on a $6.1 million claim against Memphis-based Morgan Keegan related to investments in the two RMK Select bond funds and 3 of the 4 RMK closed-end bond funds.
On February 23, 2010, an Alabama FINRA arbitration panel awarded CIC Capital Management Co., LLC, Cobb Investment Co., LLC, and CIC Financial $1,072,998.00 million on a $4.38 million claim against Morgan Keegan related to investments in the two RMK Select bond funds and 3 of the 4 RMK closed-end bond funds.
See http://finraawardsonline.finra.org/search.aspx and type in case numbers 08-03109 and 08-01465.
The awards are significant in part because the claimants were professional investors. A defense often raised by Morgan Keegan and other brokerage firms is that claimants, particularly those with some financial sophistication, should have known better than to trust them, and got what they deserved. But even sophisticated investors cannot bring their sophistication to bear on an investment when they are not given all the material information, which brokers are obligated to provide.
The recent awards seem to indicate that the arbitration panels hearing these cases have begun to fully appreciate the misconduct that Morgan Keegan engaged in while pushing the sale of its toxic bond funds.??Hundreds of investors have filed lawsuits and arbitration claims against Morgan Keegan because of the fraud associated with the bond funds, many of which have lost more than 90% of their value since mid-2007.
As of March 5, 2010, Morgan Keegan had paid $10.3 million in damages to claimants in approximately 41 arbitrations in which damages have been awarded, according to the article. The firm has also paid out millions more in settlements.
According to Pratt H. Davis of Page Perry in Atlanta, “The recent awards confirm our view that the funds contained extraordinary risks that were not disclosed to investors. The risks of the collapse of the funds was clear to Morgan Keegan when it sold the funds as the funds’ investments were highly concentrated in lower level “tranches” of ultra-risky structured finance products such as collateralized debt obligations, collateralized mortgage obligations and other asset-backed securities, many of which were directly tied to sub-prime mortgages.” When the housing market began to decline, the funds began to implode. “The funds were sold as ‘diversified’ but were in actuality a highly leveraged bet on the real estate industry” says Davis. Ultimately, the overexposure to those products cost investors more than $2 billion in losses.
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.