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Home > Blog > Did Morgan Keegan Target Seniors and Small Investors?

Did Morgan Keegan Target Seniors and Small Investors?

Regulators in five states are investigating whether Morgan Keegan, a Memphis-based brokerage firm, failed to disclose the risks associated with seven of its mutual funds.  These funds were loaded with debt positions that some have labeled “toxic.”

A number of lawsuits have been filed regarding these Morgan Keegan mutual funds.  In addition to the lawsuits, dozens of individual investors have filed FINRA arbitration claims against Morgan Keegan and its portfolio manger, James C. Kelsoe.

Morgan Keegan promoted Mr. Kelsoe’s funds as a stable source of income.  Sales materials for the High Income fund noted its “relative conservative credit posture” without “excessive credit risk.”  In reality the funds were loaded with risky asset-backed subprime mortgages securities and other questionable debt obligations.

One particularily troubling aspect of these cases is the apparent targeting of these funds to seniors and small, inexperienced investors. 

These people are exactly the type of investors who were seeking income and stability for their hard-earned savings and who could not afford to be exposed to risk.  In addition, these investors were least likely to be able to understand the complexities of the investments they held.

Business Week recently reported the story of Katherine and Lester Poer.  Mr. Poer is 81 years old.  The couple, on the advice and recommendation of a Morgan Keegan broker, took the $250,000 they received from a land sale and purchased the RMK Select Intermediate Bond fund. 

The RMK Intermediate fund has lost over 86% of its value in the last year and the Poers  have lost over $200,000 in their investment.

Unfortunately, their story is not unique.  Many other investors have found themselves in a similar situation.  Some are now retaining counsel to help them recover some of their losses.         

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