SAN FRANCISCO, April 3, 2009 (GLOBE NEWSWIRE) -- A San Francisco, California FINRA arbitration panel this week awarded $267,711, plus interest, to two California residents for losses suffered in Morgan Keegan bond funds managed by James Kelsoe. "This is the largest arbitration award to date against Regions Financial Corp.'s (NYSE:RF) Morgan Keegan division for its derivative laced bond funds that were concentrated in highly speculative CMOs and CDOs," said attorney Andrew Stoltmann of Stoltmann Law Offices in Chicago, Illinois who was co-counsel for the Claimants along with Chicago attorney Thomas Burke.
In addition to the compensatory damages, the Panel also awarded interest and assessed all forum fees against Morgan Keegan. The Claimants' losses in the bond funds were $267,711. The case, heard in San Francisco, is captioned Steve and Gary Fitzgerald v. Morgan Keegan & Company Inc. (FINRA Case Number 08-00388).
This is the fifth straight FINRA arbitration award against Morgan Keegan for the firm's proprietary bond funds. Last week a FINRA arbitration panel in Alabama awarded $50,000 to a retiree who lost money in the firm's proprietary, James Kelsoe managed bond funds. Two weeks ago another Alabama arbitration panel awarded $187,000 to a cattle farmer who had losses of $100,000.
"This arbitration award affirms our view that Morgan Keegan clearly took advantage of thousands of unsuspecting investors. These funds contained some of the riskiest derivatives possible and those risks were not made clear to investors," states Andrew Stoltmann, one of the lawyers for the Claimants. According to co-counsel Thomas Burke, "Instead of portraying these funds as the hedge fund equivalent that they were, Morgan Keegan pitched them in marketing material and advertising pieces as conservative investments. Clearly, they were not suitable or appropriate for virtually any investor."
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)
According to Andrew Stoltmann, "The full scope of the scheme engaged in by Morgan Keegan is becoming clear to FINRA arbitrators and the regulators actively investigating Morgan Keegan. Hundreds of millions of dollars in each fund were misclassified for years as preferred stocks and corporate bonds, when in fact they were high risk, below investment grade derivatives. The funds were pitched as 'widow and orphan' funds when in fact they were leveraged with highly risky derivatives in the 'toxic waste' tranches. Given the recent flood of documents and information that has come out in the last four months, it is clear Morgan Keegan has nowhere to hide. We expect significant arbitration awards against Morgan Keegan going forward. We hope the regulators take action soon against Morgan Keegan and use the findings by multiple arbitration panels as a roadmap to finally act against the firm."
For more information on the award, please contact Andrew Stoltmann or Thomas Burke.