Six years after selling its retail mutual fund business, Regions Financial
is preparing to swallow another nine-figure settlement over that business' fixed income pain during the financial crisis.
Jonathan Stempel of Reuters reports
that yesterday an outline of the settlement was filed in Memphis, Tennessee in federal court. The wire service says that the $125 million settlement would send $110 million in cash to investors in three Morgan Keegan
] mutual funds, with the remaining $15 million going into the funds themselves. Yet the fund shareholders' lawyers, Reuters
says, will shoot for taking up to 30 percent (i.e. $37.5 million) of the total.
The three funds -- the Morgan Keegan Short Term Bond Fund
, the Morgan Keegan Select Intermediate Bond Fund
, and the Morgan Keegan Select High Income Fund
-- suffered big losses in 2007 in the lead up to the financial crisis. In 2011 Finra and the SEC unveiled
a $210-million settlement with Regions over Morgan Keegan's use, and alleged hiding of that use, of mortgage-backed and asset-backed securities inside the funds. There were a number of smaller awards, too, mostly to individual investors: $1.4 million
in 2012; $1.46 million
in 2009, upheld
in 2012; $9.2 million
reinstated in 2012; $2.5 million
in 2010; and $25,000
in 2009. The funds' directors settled
with the SEC in 2013. Regions also dodged
at least one bullet, to the tune of $1.9 million, in 2012.
As the financial crisis heated up further in 2008, Birmingham-based Regions dropped
Memphis-based Morgan and PM James Kelsoe
from seven bond funds and handed them over the New York City-based Hyperion Brookfield Asset Management
]. In 2009, Regions sold
its remaining, 11-fund, retail mutual fund business to Pioneer. And in 2012 Raymond James bought
Morgan Keegan itself, a broker-dealer. Reuters
reports that the three Morgan Keegan funds in question in the settlement, now called Helios
funds, are being liquidated.
Neil Anderson, Managing Editor
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