Securities Division Sends Notice to Morgan Keegan
Wednesday, April 07, 2010 | 09:52am
NASHVILLE - The Securities Division of the Department of Commerce and Insurance has commenced an administrative action today by serving upon Morgan Keegan and other respondents the notice required under the law as a prerequisite to the formal filing of a Petition.
The step comes as other state and federal regulators file administrative actions against Morgan Keegan & Company and Morgan Asset Management and their employees James C. Kelsoe, Brian B. Sullivan, Gary Stringer, and Michele Wood. The actions are a direct result of an intensive investigation involving numerous states including Mississippi, Alabama, Kentucky and South Carolina. Those states and the U.S. Securities and Exchange Commission and the Financial Industry Regulatory Authority filed their own actions today. State law requires the Tennessee agency to serve a notice before filing an action.
At the center of the investigation were six proprietary bond funds sold by Morgan Keegan broker-dealer agents to approximately 13,000 customers nationwide. Those six proprietary bond funds lost approximately $2 billion dollars from March 31, 2007, to March 31, 2008. The state and federal agencies allege Morgan Keegan and Morgan Asset Management:
· Made material omissions and misrepresentations in marketing materials,
· made material omissions and misrepresentations in regulatory filings,
· withheld information from and misrepresented information concerning the funds to the Morgan Keegan Sales force,
· provided preferential treatment to certain customers,
· failed to make suitable recommendations concerning purchase and concentration of the funds in customer accounts,
· failed to adequately supervise their employees, and
· obstructed the due diligence process.
The notice served by the Securities Division provides an opportunity for the respondents to demonstrate their compliance with Tennessee law. These companies and individuals have a right to request an administrative hearing. Other states involved in the multi-state investigation are Arkansas, Florida, Georgia, Illinois, Louisiana, Missouri, North Carolina and Texas.
The Department of Commerce and Insurance works to protect consumers while ensuring fair competition for industries and professionals who do business in Tennessee. www.tn.gov/commerce/