Corporate & Securities Law

The SEC has charged Morgan Keegan and two employees with fraud related to subprime mortgages.  The SEC has announced administrative proceedings against Memphis, Tennessee-based firms Morgan Keegan & Company and Morgan Asset Management as well as two employees accused of fraudulently overstating the value of securities backed by subprime mortgages.

The SEC's Division of Enforcement alleges that Morgan Keegan failed to employ reasonable procedures to internally price the portfolio securities in five funds managed by Morgan Asset, and consequently didn't calculate accurate "net asset values" (NAVs) for the funds.  Morgan Keegan recklessly published the inaccurate daily NAVs, and sold shares to investors based on the inflated prices.

"This scheme had two architects - a portfolio manager responsible for lies to investors about the true value of the assets in his funds, and a head of fund accounting who turned a blind eye to the fund's bogus valuation process," said Robert Khuzami, Director of the SEC's Division of Enforcement.

This is the latest in a long list of actions against Morgan Keegan over the subprime mortgage debacle. 

In related news, the Alabama Securities Commission, the Kentucky Department of Financial Institutions, the Mississippi Secretary of State's office and the South Carolina Office of the Attorney General have filed a joint Notice of Intent to revoke the registration and impose an administrative penalty on JP Morgan for assorted unethical and illegal activities.

SNSFE continues to investigate these matters.

Source:  SEC Press Release 2010-53