In a new agreement with federal, state and independent regulators, Morgan Keegan & Co. will fork over about $200 million as part of its settlement of prior fraud charges related to its subprime MBS vehicles.
The Memphis-based firms Morgan Keegan and Morgan Keegan Asset Management agreed to settle charges that it falsified valuations of the MBS opportunities in five funds managed between January 2006 to January 2007, an announcement listed today.
Collectively, the Securities and Exchange Commission (SEC), the Financial Industry Regulation Authority (FINRA), and a "task force" of state regulators from Alabama, Kentucky, Mississippi, Tennessee and South Carolina brought about the action against the firms.
The SEC¹s June 22 order listed that it "also finds that Morgan Keegan failed to employ reasonable pricing procedures and consequently did not calculate accurate 'net asset values' for the funds."
Also, the Commission revealed that former portfolio manager James Kelsoe, and comptroller Joseph Thompson Weller will pay penalties due for their alleged misconduct that led to the inflated values. In addition to being barred from the securities industry, the SEC said that Kelsoe will pay $500,000 in penalties. Also, Weller agreed to pay a penalty of $50,000, the watchdog agency highlighted.
Collectively, the agreement includes a $25 million payment from the firm in disgorgement and interest, and a $75 million penalty to the SEC "to be placed in a Fair Fund for the benefit of the investors harmed." Additionally, Morgan Keegan will pay $100 million into a state fund, and ³abstain from fair valued securitiesŠfor three years,² the order listed.
In its response, Regions Financial Corp., the parent company for Morgan Keegan, explained that the brokerage and investment banking firm has been a subsidiary since 2001. Regions President and CEO Grayson Hall explained that "the resolution of this legacy regulatory matter gives Regions greater flexibility with respect to the Morgan Keegan franchise and the ability to explore opportunities."
Regions Financial revealed that it has retained Goldman, Sachs to "explore potential strategic alternatives for Morgan Keegan as [it] evaluates how best to manage its capital to increase shareholder value." It stated that Morgan Keegan Asset Management and Regions Morgan Keegan Trust will not partake in the analysis