REGIONS MORGAN KEEGAN AGREES TO PAY INVESTORS $125 MILLION TO SETTLE CLAIMS OVER MUTUAL FUNDS’ COLLAPSE
On August 2, 2016, after almost nine years of vigorous litigation, the United States District Court for the Western District of Tennessee granted final approval of the $125 million settlements of the open-end mutual fund class action and shareholder derivative actions. The cases were brought against defendants Regions Financial Corporation, Regions Bank, Morgan Keegan & Company, Inc., Morgan Asset Management, and PricewaterhouseCoopers, Inc.
The settlements resolve lawsuits involving allegations of securities fraud and breach of fiduciary duty as to three Morgan Keegan bond mutual funds that collapsed in 2007 after investing heavily in subprime mortgages and other risky debt. The preliminary settlements call for $110 million of cash to be paid to investors in Morgan Keegan's Short Term Bond, Select Intermediate Bond and Select High Income funds, and $15 million of cash to go directly to the funds, less any legal fees.
The definition of the Settlement Class, as approved by the Court, is:
1) Persons who purchased during the period December 6, 2004 through December 6, 2007 or held and/or redeemed during the period July 3, 2006 through May 29, 2009 shares in the Regions Morgan Keegan Select Short Term Bond Fund (“STF”) (MSTBX, RSTCX, MSBIX), the Regions Morgan Keegan Select Intermediate Bond Fund (“IBF”) (MKIBX, RIBCX, RIBIX), and/or the Regions Morgan Keegan Select High Income Fund (“HIF”) (MKHIX, RHICX, RHIIX) (collectively “the Funds”) and who are not excluded by the terms of the settlement (“Settlement Class”).
2) Persons who were shareholders of one or more of the Funds on May 29, 2009 when the Funds’ shareholders approved the formal liquidation of the Funds and who are not excluded by the terms of the settlement (“Funds Shareholders”).
To view the Long Form Notice, please click here.
To view copies of the Settlement Agreements and Orders, please click on the links below:
CLASS ACTION CASE SETTLEMENT
DERIVATIVE CASE SETTLEMENT
A Notice and Proof of Claim Form were mailed on or around February 29, 2016 to those Settlement Class Members identified by Morgan Keegan. Persons identified by the Open-End Funds as shareholders of the Funds on May 29, 2009 will be entitled to a separate distribution.
If you do not receive a Notice and Proof of Claim Form by March 15, 2016, and you believe you may be a Settlement Class Member, you should contact the Claims Administrator. www.rmkopenendfundsettlement.com
In 2007, a series of Regions Morgan Keegan open-end funds collapsed after plummeting as much as 80% in value. The funds (Regions Morgan Keegan’s Select High Income Fund, Select Intermediate Bond Fund, and Select Short Term Bond Fund), were forced to shut down and liquidate their assets, while investors lost over $1 billion.
These severe losses were not simply the result of the “mortgage meltdown.” Rather, contrary to representations made to investors, the Funds were heavily invested in the riskiest, low-priority tranches of structured finance deal, backed by risky assets. RMK never disclosed to investors that they were exposing them to the riskiest asset-backed securities, causing investors’ massive losses.
Investors brought a series of lawsuits against the defendants, including Regions Financial, Regions Bank, Morgan Keegan & Company, Inc., Morgan Asset Management, and PricewaterhouseCoopers, Inc., alleging violations of federal securities laws, breach of fiduciary duty and other state law causes of action.
The case is In re: Regions Morgan Keegan Securities, Derivative and ERISA Litigation, U.S. District Court, Western District of Tennessee, No. 09-md-02009.