JACKSON, Miss. — The state securities regulators from Alabama, Kentucky, Mississippi, South Carolina and Tennessee are notifying investors entitled to reimbursement from the recent Morgan Keegan settlement that their States’ Fund distribution checks will be mailed November 5, 2012. A.B. Data Ltd., as the Fund Administrator, will be mailing checks to all investors who filed an approved eligible claim within the claim filing period.
“Mississippi was a leader in the initial investigation, and we are pleased to see our efforts come to fruition. We contacted every participant we could by mail and/or by telephone to ensure they had applied for their funds. The Secretary of State’s Office was able to return more than $5-Million to Mississippi investors.” says Secretary of State Delbert Hosemann.
The settlement funds were not allocated by State, but rather, by investors who filed eligible claims. The Secretary of State’s Office made numerous attempts via electronic mail, United States mail, and telephone to encourage Mississippi investors to file a claim to the States’ Fund. As part of the settlement agreement, the Securities and Exchange Commission (SEC) will distribute additional settlement funds in the future.
“As pleased as we are to have recouped this large amount of settlement funds for Mississippians from the States’ Fund, we are equally disappointed the SEC has yet to begin the distribution of the other half of the settlement funds to investors,” adds Hosemann.
The settlement was a direct result of intensive multi-state, federal, and self-regulatory organization investigations conducted against Morgan Keegan & Company (MKC) and Morgan Asset Management (MAM). The States’ task force was led by Alabama, Kentucky, Mississippi, South Carolina and Tennessee in cooperation with state securities regulators from Arkansas, Florida, Georgia, Illinois, Louisiana, Missouri, North Carolina, and Texas.
The investigation involved seven proprietary mutual bond funds created by MKC and sold by MKC broker- dealer agents to more than 34,000 account holders and others. The seven funds lost approximately $1.5 billion from January 1, 2007, to March 31, 2008. The states’ Consent Orders against Morgan Keegan, Morgan Asset Management and James Kelsoe found the following violations:
· Failure to supervise agents;
· Failure to disclose risks of the funds in regulatory filings and in retail advertising material;
· Misclassification of fund holdings in regulatory disclosure filings;
· Dishonest and unethical practices in the securities business: Prohibited business practices – violating state, federal and SRO rules and suitability requirements;
· Violation of Broker-Dealer rules of conduct; and
· Failure to maintain required books/records (specifically advertising materials)
As a result of the settlement, among other sanctions, MKC and MAM agreed to:
Pay restitution to investors in the amount of $200 million ($100 million to be distributed by the states on November 5, 2012 and $100 million to be distributed by the SEC [Securities and Exchange Commission] on a yet-to-be-determined date);
Direct payment by MKC and MAM of the administrative expenses of both distribution funds so that all $200 million in restitution will be distributed to investors;
Cease & Desist from violating the various state securities Acts;
Comply with the various state securities Acts;
A permanent bar of Mr. Kelsoe from the securities industry and a $500,000 civil penalty;
Payment of $10 million in civil penalties to be split among the states in which MKC/MAM operated; and
A reimbursement payment to the North American Securities Administrators Association (NASAA) for joint task force expenses.
Investors with questions about the States’ Fund Distribution should contact A.B. Data Ltd. at 1-888-208-9083.
Investors with questions about the SEC’s Fair Fund Distribution should also contact A.B. Data Ltd. at 1-888-208-9083.