FORT LAUDERDALE, Fla., Feb. 23, 2010 (GLOBE NEWSWIRE) -- Regions Financial Corp.'s (NYSE:RF) Morgan Keegan unit was ordered by a FINRA arbitration panel to pay over $1.1 million dollars in yet another verdict relating to the sale of Regions Morgan Keegan ("RMK") mutual funds. A Financial Regulatory Authority (FINRA) arbitration panel in Birmingham, Alabama awarded companies related to General Henry Cobb the sum of $1,137,377.88. The award represents 80% of the $1.4 million of net losses in the RMK funds. Morgan Keegan is the subject of numerous arbitration cases relating to over $2 billion of losses in RMK proprietary bond mutual funds managed by James Kelsoe, which funds were decimated due to allegedly risky investments in lower tranches of asset backed securities, commonly known as "toxic waste." Last week, Morgan Keegan was ordered to pay $2.5 million to another investor, also relating to RMK funds.
According to Jeffrey Erez, Esq. and Richard Frankowski, Esq., who represented Cobb, the arbitration panel specifically found that the award against Morgan Keegan was "on the basis of misrepresentation and failure to disclose the true nature of the RMK funds." Erez and Frankowski stated that "this award provides clear support for our allegations that Morgan Keegan deceptively marketed and sold Regions Morgan Keegan (RMK) branded high-yield bond mutual funds as safe, low risk investments although the funds in fact invested in very risky lower tiers of structured finance which most bankers call toxic waste." Last summer, the Securities and Exchange Commission hit Morgan Keegan with a "Wells Notice," which notice indicates that the SEC intends to bring an enforcement action for possible violations of federal securities laws. "We believe this was the first case where an arbitration panel read the SEC's Wells Notice to Morgan Keegan," added Mssrs. Erez and Frankowski.
This latest awards comes on the heels of other arbitration awards won by Mssrs. Erez and Frankowski, as well as other awards, including last week's $2.5 million dollar award against Morgan Keegan, a $1.4 million award to former NBA star, a $950,000 award to former NFL star, and a nearly $700,000 award to a former Regions bank president and his brother. Like other victims, General Cobb brought an arbitration action against Morgan Keegan, alleging that it had misrepresented the true nature of its RMK funds.
"We are very pleased that the arbitrators are recognizing and agree with our claims that General Cobb, and others, are victims of what we believe was deceptive marketing by Morgan Keegan in the selling of their RMK proprietary bond mutual funds to our clients and others.
"We believe that many Morgan Keegan brokers were improperly used as conduits to put out false and misleading information to get their clients to purchase Morgan Keegan branded high yield bond mutual funds, managed by James Kelsoe. Mr. Kelsoe reached "rock star" status as the RMK funds produced very high yield in the early years, before he and the Morgan Keegan funds crashed, burned, and in some cases, were liquidated due to their high concentration in toxic waste, which high risk we believe was not disseminated by Morgan Keegan brokers or advertisements given to our clients," added Frankowski.
It was alleged in the Cobb case that Morgan Keegan helped to create and sell high yield bond mutual funds managed by former Morgan Keegan employee, James Kelsoe, that were allegedly stable high yield bond mutual funds but were in fact highly speculative due to investments in low-tiered asset backed securities, commonly called "toxic waste." Now there are hundreds of arbitration claims nationwide pending against Morgan Keegan, Reuters reported. Regions Morgan Keegan (RMK) bond mutual funds managed by James Kelsoe lost over $2 billion dollars in 2007 and 2008.
"In my opinion, this means that the arbitration panels are recognizing that the RMK bond mutual funds sold by Morgan Keegan and managed by James Kelsoe were mismarketed," added Jeffrey Sonn, Esq. of Sonn & Erez.
According to Richard Frankowski, Esq., the Morgan Keegan bond funds that are the subject of hundreds of investor arbitrations include the following:
* Regions Morgan Keegan Select High Income-A, (Sym:MKHIX)
* Regions Morgan Keegan Select High Income-C, (Sym:RHICX)
* Regions Morgan Keegan Select High Income-I, (Sym:RHIIX)
* RMK High Income Fund, (Sym:RMH)
* RMK Strategic Income Fund, (Sym:RSF)
* Regions Morgan Keegan Select Intermediate Bond Fund-A,
(Sym:MKIBX)
* Regions Morgan Keegan Select Intermediate Bond Fund-C,
(Sym:RIBCX)
* Regions Morgan Keegan Select Intermediate Bond Fund-I,
(Sym:RIBIX)
* RMK Multi-Sector High Income, (Sym:RHY)
* RMK Advantage Income, (Sym:RMA)
*RMK Strategic Income Fund (SymRSF)
*RMK High Income Fund (Sym:RMH)
In 2008, Hyperion Brookfield announced its appointment as Advisor to certain of the RMK funds, replacing James Kelsoe. For more information on the awards, please contact Jeffrey Erez or Richard Frankowski.