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Preliminary Approval of Settlement in Regions Morgan Keegan ERISA Lawsuit

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Memphis, TNPreliminary approval has been given for a $22.5 million settlement in a Regions Morgan Keegan ERISA plan lawsuit. The ERISA lawsuit alleged breach of fiduciary duty on the part of those responsible for various Regions Morgan Keegan-run employee benefits plans.

The settlement covers participants and beneficiaries of employee benefits plans run by Regions Morgan Keegan, in which the financial firm provided trustee, custodial, investment management or investment advisory services; or in which the plan had assets invested in RMK Bond Funds from November 9, 2006 through July 29, 2008. The settlement will see a payment of $22.5 million from Regions Morgan Keegan to resolve the claims against it.

One lawsuit (which was consolidated with the ERISA class action, case number 2:09-md-02009-SHM-dkv, filed in the US District Court for the Western District of Tennessee) alleged that through the defendants, the plaintiffs purchased shares in Regions Morgan Keegan funds, which were poor investments. Among issues with the funds, according to court documents, were that they were invested in complex securities with risks that were difficult to assess; they invested more than 15 percent of assets in illiquid securities, despite this being against stated policy; and they invested in subprime investment structures.

The lawsuit noted that an August 2007 filing with the Securities and Exchange Commission disclosed asset liquidity and valuation problems. Following the filing, the value of the funds decreased dramatically. Furthermore, plaintiffs argued that initial communications from Regions Morgan Keegan downplayed the reasons the funds lost value. By the time the defendants liquidated the plaintiff’s stake in the funds, the plan had lost more than $1.5 million - more than half of its investment.

In their lawsuit, the plaintiffs alleged that the defendants breached their fiduciary duties under ERISA by investing assets in Regions Morgan Keegan Funds.

Plan fiduciaries are the people who have discretion in administering, managing and controlling a plan’s assets. Fiduciaries have a duty to act solely in the interest of plan participants and their beneficiaries and to act prudently when carrying out their duties. They must also follow plan documents, except where those documents conflict with ERISA rules.

ERISA lawsuits are frequently filed alleging plan fiduciaries breached their responsibilities, by not acting in the best interests of plan participants, by choosing investments that were not suitable or by continuing to offer investments even after they became unsuitable.

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