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SEC Investigating Morgan Keegan

The Securities and Exchange Commission recently charged Tennessee-based broker-dealer Morgan Keegan & Company, Inc. for misleading thousands of investors about the liquidity risks associated with auction rate securities, and the agency is seeking a court order requiring Morgan Keegan to repurchase the illiquid auction rate securities from its customers.

The SEC alleges that Morgan Keegan misrepresented to customers that auction rate securities were safe, highly liquid investments that were comparable to money market funds. Morgan Keegan sold approximately $925 million of auction rate securities to its customers between Nov. 1, 2007, and March 20, 2008, but failed to inform its customers about increased liquidity risks for auction rate securities even after the firm decided to stop supporting the auction rate securities market in February 2008.
“Morgan Keegan was clearly aware that the auction rate securities market was deteriorating, but it went so far as to actually accelerate its auction rate securities sales even after other firms’ auction rate securities auctions began to fail,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “As we’ve done in our enforcement actions against other firms, the SEC is firmly committed to restoring liquidity to Morgan Keegan customers who purchased auction rate securities.”

The SEC’s complaint, filed in U.S. District Court for the Northern District of Georgia, alleges that Morgan Keegan ignored indications that the risk of auction failures had materially increased amid investor concerns about the creditworthiness of auction rate securities insurers, auction failures in certain segments of the auction rate securities market, increased clearing rates for auctions managed by Morgan Keegan and other broker-dealers, and higher than normal auction rate securities inventories at Morgan Keegan.

The SEC is seeking an injunction against Morgan Keegan for violations of the antifraud provisions of the federal securities laws, as well as disgorgement, financial penalties, and other equitable relief for investors.

If you have questions about auction rate securities you purchased as Morgan Keegan or another broker dealer, or if you believe that you have been the victim of a securities fraud, The White Law Group may be able to help. To speak to a securities attorney, please call our Chicago office at 312-238-9650.

The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Boca Raton, Florida.

To learn more about The White Law Group, visit https://whitesecuritieslaw.com.

Tags: , Last modified: November 2, 2023