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Morgan Keegan: Allegations of Fraud Leading to Huge Losses

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Memphis, TNAs the fallout from a bear market reverberates through the investment community, and the pieces from the sub-prime mortgage implosion are gingerly salvaged or discarded, investors are taking exception to the inability of Morgan Keegan to see writing on the wall. Investors having lost millions are lining up to recover damages.

Business LossThe latest arbitration claim against Morgan Keegan was filed May 22nd on behalf of an investor who lost an astounding $4 million. The plaintiff alleges damages relating to the sale of unsuitable bond funds: among them the RMK High Income Fund (RMH), the RMK Multi-Sector High Income Fund (RHY), the RMK Advantage Income Fund (RMA), the RMK Strategic Income Fund (RSF), and the Regions MK Select High Income Fund (MKHIX).

The claim was filed with the office of the Financial Industry Regulatory Authority (FINRA) and their Office of Dispute Resolution with regard to the alleged misrepresentation and omission of material information in the identified Funds' registraiton statements and prospectus releases with regard to the nature, and the extent of the Funds' investments in collateralized debt obligations (CDSs), together with the resuiltng exposure to the sub prime mortgage market.

The claim alleges further damages stemming from alleged false and misleading statements issued by Morgan Keegan with regard to the Funds' safety, and capacity for generating income.

There are some who feel the arbitration process is a faster, more efficient way of dealing with such losses as opposed to a class action lawsuit, which could take far longer to settle.

Still, there is no shortage of lawsuits on behalf of angry investors who feel Morgan Keegan could have done more to mitigate losses as the market began to tumble last year, by managing the Funds more effectively, and coming clean with the real risk allegedly inherent to the Funds with regard to their exposure to the collapsing sub-prime mortgage market.

The allegation of fraud against the Memphis-based investment firm ties to investor claims that they were led to believe the Funds were a safe, stable investment. In reality, investors are accusing the firm of shrouding the Funds' true risk behind a cloak of hype and good intentions.

Six of the RMK funds were found to have lost more than half their value in 2007 due to their exposure to the volatile sub-prime mortgage market.

Besides the $4 million sought in the arbitration claim, other litigants are seeking to recover sums ranging from $285,000 to $1.8 million, according to reports.

The Morgan Keegan factor has also affected smaller investors too, including charities. This past October a charity based in Indiana filed a FINRA claim against Morgan Keegan representing almost $50,000 pertaining to a loss in one of the RMK funds. The brokerage firm is reported to have extended an unidentified sum to the charity earlier this year, in an effort to settle the matter.

There will undoubtedly be more matters to settle as more litigants come calling, and investors will not accept the principle that general volatility in the market can make, or break investments. In this case it is alleged that Morgan Keegan continued to happily accept, and invest sums of their client's money without disclosing to the investor the true risks associated with the investment product.

Investing is serious business today, and no longer the bastion of the wealthy. With the retirement industry moving away from traditional pension plans, and with fewer people spending decades, or an entire career with one company, investing for ones' retirement through a 401(k) plan puts an added level of importance and urgency to the concept, and the practice of investing. And with only a handful of peak earning years to make your mark in your portfolio, time is not on your side. You can't afford to make too many mistakes.

And you certainly can't allow a brokerage firm to lead you down the garden path…



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