Posted in: FINRA | Arbitrations | Greedy Brokers | Risky Investments | RMK Funds |
Last Friday a FINRA arbitration panel ordered Memphis-based Morgan Keegan & Co. to pay $2.5 million to an investor for losses tied to six bond funds. According to FINRA, the federal regulator has received 400 similar arbitration complaints against Morgan Keegan, with the majority still pending.
The Wall Street Journal said Morgan Keegan was found liable for negligence, selling unsuitable investments, and for failing to supervise its employees. Andrew Klein, and his companies, originally sought more than $12 million in damages. Klein alleges Morgan Keegan allegedly failed to disclose the “nature an magnitude” of risks relating to the funds, “until it was too late.”
In a statement, Morgan Keegan said this award was the largest award involving the bond fund to date.
Customers have alleged Morgan Keegan had advertised their Regions Morgan Keegan Funds, or RMK Funds, as a stable and safe way to generate profits. According to the Memphis Daily News, one broker had reportedly referred to the funds as a “widows and orphans fund” because of its principal protect.
From June to December 2007, the funds’ combined value had plummeted from $2.1 billion to $324 million. Morgan Keegan did not tell its investors the bond funds were not diversified, and tied to a doomed sub-prime real estate market. In addition to being unsafe, investors would discover the difficulty of selling these bonds after they had dropped in value.
In addition to selling to both individual and corporate investors, Morgan Keegan also advertised and sold RMK Funds to charities and non-profits. The broker-dealer settled with The Indiana Children’s Wish Fund in December 2007 as the result of $48,000 in RMK Fund losses.
Morgan Keegan changed the name of its bond funds in December 2008 to combat negative publicity, but that has not stopped customer lawsuits and individual arbitration claims. Of the 80 arbitration cases heard so far involving RMK Funds, 41 have resulted in awards. Other cases have been settled, and an additional 114 cases were dropped before the hearing.
Following last week’s $2.5 million decision, FINRA today awarded $1.1 million to Henry Cobb, an 89-year-old World War II Army veteran.
Morgan Keegan may blame the failure of RMK Funds on the economy, but their clients were misled into believing these were safe investments.
If you have suffered losses due to your investment in RMK Funds, contact us immediately for a free case review. With our help, you may be entitled to damages.
