More investors are scoring legal victories in their claims against Morgan Keegan & Company and a group of proprietary mutual funds. As reported June 7, 2009, by The Birmingham News, 16 of investors’ 20 wins came in the past 25 arbitration hearings with the Financial Industry Regulatory Authority (FINRA). In April, the Memphis-based investment firm suffered six consecutive losses in arbitration negotiations with investors.
Many investors who have filed claims with FINRA lost up to 95% of their money the Morgan Keegan mutual funds.
The claims against Morgan Keegan involve several collapsed bond funds that plummeted in value following the onset of the mortgage loan crisis. The common theme in the majority of investors’ claims is that Morgan Keegan misrepresented the mutual funds as corporate bonds and preferred stocks, giving the illusion of diversification and low risk levels.
Later, losses in the funds – which entailed more than $2 billion between March 31, 2007, and March 31, 2008 – were traced back to the underlying investments made by Morgan Keegan. The investments included risky and untested types of subprime mortgage securities, collateral debt obligations (CDOs) and other debt instruments.
Hyperion Brookfield Asset Management now manages the funds at the center of the ongoing litigation.