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Regions Morgan Keegan Funds
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Lawsuits have been filed against Morgan Keegan alleging that the defendants either misrepresented or did not disclose certain material facts about Regions Morgan Keegan Funds to investors. As a result, investors with money in those Morgan Keegan Bond Funds allegedly lost a large amount of money. The RMK Funds in question include the Select Intermediate Bond Fund ("MKIBX") and the Select High Income Fund ("RHIIX"). The Regions Morgan Keegan lawsuit was filed on behalf of investors who acquired shares of either of the RMK funds between December 6, 2004, and October 3, 2007.
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According to the lawsuits, the RMK Funds suffered heavy losses in share value because they were invested in new types of fixed income securities. The lawsuit also alleges that the defendants did not follow proper procedure in investing the RMK Funds' assets, which made the funds vulnerable to changes in the market. The Regions Morgan Keegan Funds allegedly suffered a decline in value of between approximately 50 percent and 65 percent.
Regions Morgan Keegan Lawsuit
The lawsuits allege that the defendants misrepresented or did not disclose facts about the Funds including the nature of the risk associated with the Funds, the illiquidity of securities in which the Funds invested, breaches and conditions in the Funds' portfolios and the concentration of investments in a single industry that exceeded the Funds' restrictions.
Examples of RMK Bond Funds that have reportedly suffered losses of year-to-date returns as of 12/31/07 include:
According to an article by Craig McCann ("Regions Morgan Keegan: The Abuse of Structured Finance, published in the PIABA Bar Journal, Vol. 16 No. 1, 2009), investors in six Regions Morgan Keegan bond funds lost approximately $2 billion in 2007. McCann argues that RMK did not disclose in its filings with the Securities and Exchange Commission exactly what risks the investors faced until after losses occurred.
RMK funds were heavily invested in Collateralized Bond Obligations (CBOs), Collateralized Loan Obligations (CLOs), and Collateralized Mortgage Obligations (CMOs). These securities are reportedly illiquid and, in the case of CMOs, allegedly based on subprime mortgages. When the subprime mortgage crisis began, many securities that held subprime mortgages lost much of their value, if not all of it.
Lawsuits allege that investors were not alerted to the risky nature of the RMK Funds and were, in fact, made to believe that the investments were safe and conservative when they were actually highly risky.
In September 2011, the US Sixth Circuit Court of Appeals dismissed a class-action lawsuit against Morgan Keegan, finding that the lawsuit should be heard by federal court rather than state court. Many of the investors involved in this lawsuit are reportedly involved in another claim against Morgan Keegan. In June, Morgan Keegan was handed a $210 million fine from state regulators and the SEC but admitted no wrongdoing in its handling of subprime mortgage-backed securities.
RMK Funds Lawsuit
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