As one dramatic chapter in Regions Financial Corp.’s history ends, another is about to begin.

On Wednesday, the firm announced that its brokerage and investment banking subsidiary, Morgan Keegan & Co., and its asset management subsidiary, Morgan Keegan Asset Management, have agreed to a $210 million settlement involving federal and state regulatory charges of improper fund-valuation practices.

At the same time, Regions, a full-service provider of consumer and commercial banking, trust, securities brokerage, mortgage, and insurance products and services, said it plans to sell Morgan Keegan in the aftermath of the settlement with the Securities and Exchange Commission, the Financial Industry Regulatory Authority, and a group of state securities regulators. The settlement involves certain mutual funds and closed-end RMK Funds — a business that Morgan Keegan divested in 2008.

With the regulatory action settled, Regions has retained Goldman, Sachs & Co. to explore potential strategic alternatives for Memphis-based Morgan Keegan as it focuses on its ongoing capital planning process and evaluates how to best manage its capital to increase shareholder value on the heels of the controversy.

Year to date, Morgan Keegan has been senior manager on 198 new municipal bond issues amounting to $3.9 billion. That places it ninth nationally among muni underwriters, according to Thomson Reuters.

Morgan Asset Management and Regions Morgan Keegan Trust will not be included in the review, the company said.

“Morgan Keegan has been a subsidiary of Regions since 2001 and a very valuable franchise,” Grayson Hall, Regions president and chief executive officer, said in a statement. “However, the resolution of this legacy regulatory matter gives Regions greater flexibility with respect to the Morgan Keegan franchise and the ability to explore opportunities that are consistent with our strategic and capital planning initiatives.”

“Regions is committed to continuing to provide a full range of products and services seamlessly to its customers, including through a continuing relationship with Morgan Keegan,” Hall said.

According to the enforcement action against Morgan Keegan, the full-service brokerage and investment banking firm failed to properly address fair-value issues throughout its operations — from the funds’ management to its accounting to its sales staff. The company “smoothed” declines, used arbitrary valuations, and asked broker-dealers to offer manipulated prices as benchmarks for the subprime assets in certain mutual and closed-end funds, the action stated.

Under the terms of the settlement, investors who lost $1.5 billion in the RMK Funds in any state as a result of manipulated evaluations involving subprime mortgage-laden mutual funds managed by Morgan Keegan will receive $200 million combined of the total $210 million settlement.

SEC associate regional director Bill Hicks said that the regulatory watchdog felt the amount was appropriate — even though alleged damages to investors were nearly seven times that amount.

Besides the monetary retribution, the settlement action also bars the company from involvement in issuing fair values for securities for three years. In addition, the SEC has barred James Kelsoe Jr. from the securities industry and fined former Morgan Keegan comptroller Thomas Weller $50,000.

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