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Couple Wins $250,000 in Filing against Regions Morgan Keegan

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Greenwich, CTA couple whose money was put in a hedge fund that eventually was invested in Bernard Madoff Securities has been awarded $250,000 in their arbitration against Regions Morgan Keegan. This arbitration filing is separate from those involving RMK Funds, such as the RMK high income fund, but adds to the list of arbitrations that Regions Morgan Keegan has lost in the past few months.

According to Reuters (03/01/11), the FINRA (Financial Industry Regulatory Authority) panel found that Morgan Keegan did not fulfill its duties adequately investigating Greenwich Sentry LP, a feeder fund for Bernard Madoff's Securities. The article notes that a couple, Jeffrey and Marisel Lieberman, invested $200,000 in the fund.

In making its decision, the panel said Morgan Keegan was "grossly negligent in not performing substantial due diligence," and misrepresenting the risks associated with the fund, which reportedly filed for bankruptcy late in 2010.

In addition to awarding the $200,000, the panel awarded the couple six percent annual interest from the date the investment was made and $50,000 in punitive damages. Morgan Keegan has reportedly said it will appeal the award. Although Morgan Keegan was found negligent in not performing due diligence on Greenwich Sentry LP, the financial advisor for the Liebermans was not found to be negligent. The panel determined that the advisor did not know that he was giving misleading information to his clients.

Morgan Keegan also faces lawsuits and arbitration filings alleging that the financial firm did not disclose important facts about certain Regions Morgan Keegan Funds to investors. According to reports, the RMK Funds lost between 50 and 65 percent of their value.

An article by Craig McCann, "Regions Morgan Keegan: The Abuse of Structured Finance", which was published in the Piaba Bar Journal (Vol. 16, No. 1, 2009), reports that investors in six Regions Morgan Keegan funds lost approximately $2 billion in 2007. During that time, McCann reports, similar funds had either positive returns or modest losses at most.

According to McCann, Regions Morgan Keegan failed to disclose in its filings with the Securities and Exchange Commission what risks investors were exposed to until after the losses occurred.


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