Corporate & Securities Law

Morgan Keegan Faces Possible SEC Action Over Its Failure To Disclose Risks Associated With Auction-Rate Securities

By James Eccleston

Regions Financial may face SEC charges.

The U.S. Securities and Exchange Commission may launch a civil proceeding against the Morgan Keegan & Co. brokerage unit of Regions Financial Corp. 

In its quarterly report filed with the SEC, Regions said the regulator filed a "Wells Notice" in March against Morgan Keegan.  Such a notice indicates that civil action is possible, and gives the recipient a chance to mount a defense.

Regions said the SEC is investigating the adequacy of Morgan Keegan's disclosures of liquidity risks associated with auction-rate debt, and whether it sold a large volume of the debt after its ability to support the auctions was diminished.  It said Morgan Keegan has cooperated with the SEC, and is buying back auction-rate debt it sold to retail customers.

Rates on auction-rate debt reset in periodic auctions.  Regulators say brokerages misled investors into believing the debt was safe and the equivalent of cash.  After the $330 billion market seized up in February 2008, many investors could not sell the debt or could sell it only at a loss.

Lawyers at SNSFE continue to investigate the auction-rate debacle.  Investors should feel free to contact lawyers at SNSFE.

Source:  Reuters

Full post as published by FinancialCounsel on May 15, 2009 (boomark / email).