Morgan Keegan Lawsuit

REGIONS MORGAN KEEGAN AGREES TO PAY INVESTORS $125 MILLION TO SETTLE CLAIMS OVER MUTUAL FUNDS’ COLLAPSE

On August 2, 2016, after almost nine years of vigorous litigation, the United States District Court for the Western District of Tennessee granted final approval of the $125 million settlements of the open-end mutual fund class action and shareholder derivative actions. The cases were brought against defendants Regions Financial Corporation, Regions Bank, Morgan Keegan & Company, Inc., Morgan Asset Management, and PricewaterhouseCoopers, Inc.

The settlements resolve lawsuits involving allegations of securities fraud and breach of fiduciary duty as to three Morgan Keegan bond mutual funds that collapsed in 2007 after investing heavily in subprime mortgages and other risky debt. The preliminary settlements call for $110 million of cash to be paid to investors in Morgan Keegan’s Short Term Bond, Select Intermediate Bond and Select High Income funds, and $15 million of cash to go directly to the funds, less any legal fees.

The definition of the Settlement Class, as approved by the Court, is:

  1. Persons who purchased during the period December 6, 2004 through December 6, 2007 or held and/or redeemed during the period July 3, 2006 through May 29, 2009 shares in the Regions Morgan Keegan Select Short Term Bond Fund (“STF”) (MSTBX, RSTCX, MSBIX), the Regions Morgan Keegan Select Intermediate Bond Fund (“IBF”) (MKIBX, RIBCX, RIBIX), and/or the Regions Morgan Keegan Select High Income Fund (“HIF”) (MKHIX, RHICX, RHIIX) (collectively “the Funds”) and who are not excluded by the terms of the settlement (“Settlement Class”).
  2. Persons who were shareholders of one or more of the Funds on May 29, 2009 when the Funds’ shareholders approved the formal liquidation of the Funds and who are not excluded by the terms of the settlement (“Funds Shareholders”).

To view the Long Form Notice, please click here.

More Settlement Information

The Court has appointed the Garden City Group to supervise, administer and handle the processing of the settlement claims. We encourage you to visit the website dedicated to the settlement for more information and important deadlines: www.rmkopenendfundsettlement.com

Background

In 2007, a series of Regions Morgan Keegan open-end funds collapsed after plummeting as much as 80% in value. The funds (Regions Morgan Keegan’s Select High Income Fund, Select Intermediate Bond Fund, and Select Short Term Bond Fund), were forced to shut down and liquidate their assets, while investors lost over $1 billion.

These severe losses were not simply the result of the “mortgage meltdown.” Rather, contrary to representations made to investors, the Funds were heavily invested in the riskiest, low-priority tranches of structured finance deal, backed by risky assets. RMK never disclosed to investors that they were exposing them to the riskiest asset-backed securities, causing investors’ massive losses.

Investors brought a series of lawsuits against the defendants, including Regions Financial, Regions Bank, Morgan Keegan & Company, Inc., Morgan Asset Management, and PricewaterhouseCoopers, Inc., alleging violations of federal securities laws, breach of fiduciary duty and other state law causes of action.  The class action is In re: Regions Morgan Keegan Open-End Mutual Fund Litigation (No. 2:07-cv-02784) and the derivative shareholder action is Landers et al. v. Morgan Asset Management Inc. et al. (No. 2:08-cv-02260), which are two separate cases that are included in the multidistrict litigation In Re: Regions Morgan Keegan Securities, Derivative and Employee Retirement Income Security Act (ERISA) Litigation (2:09-md-02009).

Law firms representing investors

  • Apperson, Crump & Maxwell
  • Lockridge Grindal Nauen
  • Zimmerman Reed

News

January 23, 2015: Regions Financial reaches $125 mln settlements over funds’ collapse, reuters.com