That's what happens when you are promised one thing only to be delivered another. Investors know that playing the stock market is risky business. Investors aren't stupid. That's why they ask the question they ask of their brokers. What's the risk? Does it fit my risk tolerance? What are the funds exposed to and what is the expected risk to performance?
Investing is a gamble, but it's not impossible to do it well provided the investor has all the necessary information. But such is the crux of the basket of Morgan Keegan investment funds that have failed so miserably in this bear market, and the stunning losses investors have been made to bear.
And while their Morgan Keegan brokers turned out to be the bearer of bad news once the funds turned sour, they may not have necessarily been the bearer of all the facts when the investment was made in the first place.
That's why there are lawsuits, with several more arbitration claims filed earlier this month against Morgan Keegan and Company Inc., on behalf of investors who purchased the RMK Multi-Sector High Income Fund (NYSE:RHY), RMK Strategic Income Fund, RMK High Income Fund (NYSE:RMH) and RMK Advantage Income Fund (NYSE:RMA).
The investors here, like those before them, lost plenty—with the funds losing as much as 90 percent of their original value due to the exposure to the sub-prime mortgage sector. Such exposure was not necessarily conveyed to the investor, and plaintiffs in fact maintain that representatives employed by Morgan Keegan marketed the funds to investors as an alternative to money market funds.
Investors thought they were purchasing safe, conservative funds. In reality, they received the opposite.
Imagine that were true if you were buying a car, and the manufacturer promoted the fact that the vehicle had air bags. Then you get into an accident and you find that there are no air bags at all. That little discrepancy could cost you serious injury, or even your life. Thankfully that kind of thing doesn't happen. Sure, there are recalls. Sure, there are accidents. But an accident is far removed from deliberately being led down the garden path.
Where you get to cry foul is if you order air conditioning or aluminum rims, and don't get them. You paid for something based on the promise of a dealer or supplier, who did not deliver. In a case like that, you can always take it back.
How would you feel if you bought a house, only to find that it sat on contaminated soil? Chances are the sale would never happen in the first place. That's what home inspectors and real estate lawyers are for, to vet the property so you don't sink your life savings into something, only to be left with nothing in the end.
Here, is where there is a parallel with investing, and in similar fashion to the kind of debacle that Morgan Keegan fraud demonstrates. Most people do not invest as a hobby—they haven't got that kind of financial solvency. They invest out of need, to secure a nest egg for the future. That's why investors ask the questions, and that's why investors depend on the truthful responses of brokers. Is this safe? Is this risky? Am I putting my life savings into something that may go belly-up?
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Thus, you go in trusting yourself to ask all the right questions, and you trust the broker to give you all the proper answers. Not what you want to hear, but what IS. Tell it to me straight, bro! My life savings, and my very existence at retirement, depends on it.
The allegation with Morgan Keegan investment funds, and the Morgan Keegan stock crisis that has resulted, is that the straight talk didn't happen. And thanks to alleged Morgan Keegan fraud, investors have lost millions they may never hope to get back.
You can return a toaster and trade in a car, but you have only one chance to get your retirement right. And when someone else screws it up and costs you time you do not have, it's time to call a lawyer.