According to investors, the bond funds were marketed as being a higher-income alternative to the money market. They also say they were told the funds were safe. What they were not told, they allege, is that the funds ran the risk of extremely high losses in a short time. In some cases, between 50 and 65 percent of the value of the funds was lost, depending on the specific fund.
Although Regions Morgan Keegan reportedly won a number of the initial Financial Industry Regulatory Authority (FINRA) claims against it, more awards are reportedly being given to investors who say they were not adequately warned about the risks associated with the Regions Morgan Keegan Funds. Furthermore, they say they were not told about the illiquid nature of the securities that the funds were invested in.
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"The Regions Morgan Keegan funds collapsed because they held concentrated holdings of low-priority tranches in structured finance deals backed by risky assets," McCann writes. He further alleges that Regions Morgan Keegan misrepresented its asset-backed securities as corporate bonds in Securities and Exchange Commission filings and that the financial firm's prospectuses and Statements of Additional Information did not disclose the substantial risks that investors faced.
McCann concludes that investors in the Regions Morgan Keegan Funds were not aware of the risks until after the losses occurred because the financial firm misrepresented the securities and misled investors by claiming the funds were diversified when they were not.