The information contained on this webpage is only a summary.
The Proposed Plan of Distribution for the SEC Fair Fund is now available and can be downloaded on the SEC Fair Fund Page of this website.
NOTICE REGARDING THE SEC FAIR FUND – PLEASE READ:
Earlier this year, the Fund Administrator provided to known potential injured parties a “Distribution Plan Notice to Morgan Keegan Investors” that contained information about the upcoming distributions of the States’ Fund and the SEC Fair Fund. This notice is an important clarification regarding the distribution of the SEC Fair Fund.
The SEC’s Rules on Fair Fund and Disgorgement Plans require that we, as the Fund Administrator, propose for the SEC’s consideration a distribution plan that will control how the SEC Fair Fund will be divided among injured parties. The Fund Administrator is currently working with the staff of the SEC to develop that plan, and our hope is that the proposed plan will be completed shortly. Once the plan is complete, the SEC’s rules require that it be posted on the SEC website for 30 days to allow for public comment on the contents of the plan. (You can find the SEC’s page on which the proposed plan will be posted for comment here: http://www.sec.gov/litigation/fairfundlist.htm.) When that happens, we will post it on this website as well. After the comment period, the SEC will approve, modify or disapprove the plan, and if approved or modified, the Fund Administrator will begin administration of the SEC Fair Fund pursuant to the plan.
Because the plan is still being developed and has not been approved by the SEC, the proposed terms are subject to change by the SEC on its own initiative or in response to public comments. Accordingly, it is important that you understand that any Fair Fund loss calculation previously provided to you is still preliminary and subject to change. Moreover, the June 16, 2012 proof of claim deadline does not apply to the SEC Fair Fund. The deadline for providing a proof of claim for the SEC Fair Fund will be determined by the forthcoming distribution plan, and you will be notified once it is established.
Joseph P. Borg, Director of the Alabama Securities Commission; Charles A. Vice, Commissioner of Kentucky Department of Financial Institutions; Delbert Hosemann, Mississippi Secretary of State; Alan Wilson, Attorney General & Securities Commissioner, South Carolina; and Julie Mix McPeak, Commissioner of the Department of Commerce and Insurance, Tennessee; along with Robert Khuzami, Enforcement Director, U.S. Securities and Exchange Commission (SEC), Washington D.C., and William P. Hicks, Associate Regional Director, SEC Atlanta Regional Office; and Brad Bennett, Executive Vice President and Enforcement Director for the Financial Industry Regulatory Authority (FINRA), announced today a settlement and entry of consent orders and administrative orders with Morgan Keegan & Company (MKC) and Morgan Asset Management (MAM). These actions are a direct result of intensive multi-state, federal, and self-regulatory organization (SRO) investigations. 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 centered around seven proprietary mutual funds sold by Morgan Keegan broker dealers and are listed below:
Regions Morgan Keegan Select Intermediate Bond Fund(“Intermediate Bond Fund”)
Regions Morgan Keegan Select High Income Fund(“Select High Income Fund”)
Regions Morgan Keegan Advantage Income Fund(“Advantage Income Fund”)
Regions Morgan Keegan High Income Fund (“High Income Fund”)
Regions Morgan Keegan Multi-Sector High Income Fund (“Multi-Sector High Income Fund”)
Regions Morgan Keegan Strategic Income Fund(“Strategic Income Fund”)
Regions Morgan Keegan Select Short Term Bond Fund(“Short Term Bond Fund”)
The distribution plan for the States’ fund may be downloaded by following the link below:
The plan of distribution for the SEC fund is still in the process of being developed and approved.
Highlights/excerpts of the consent orders (please refer to copies of the orders on the States’ Page for complete details):
1. MKC and MAM are ordered to pay a total of $200 million. Of this $100 million will go to establish an “SEC Fair Fund” and $100 million will go to establish a “States’ Fund” both for the benefit of investors. All costs, expenses, and charges associated with the Fair Fund and the States’ Fund management and distributions shall be paid by MKC and MAM in addition to the funds established for investors.
2. MKC and MAM are prohibited from creating, offering or selling any proprietary funds for a period of two years.
3. In addition to regular audits and examinations State regulatory authorities may conduct additional audits or examinations of the offices and branch offices of MKC and MAM; and, for the next two years, appropriate costs associated with these special audits or examinations will be paid by MKC/MAM.
4. If MKC/MAM forms and sells any proprietary investment products before January 1, 2016, for three years the firms are required to retain an independent auditor, at their expense. This auditor must be acceptable to a representative selected by state securities regulators from Alabama, Kentucky, Mississippi, South Carolina and Tennessee, and the SEC.
5. For the next three years, MKC and MAM will provide special mandatory training to all firm registered agents and investment adviser representatives which is required to be comprehensive for each of the products and offerings sold or recommended to clients. Further, MKC and MAM must also conduct training on suitability and risks of investments. MKC and MAM shall develop and implement course evaluations in order to assess the effectiveness of the training.
6. MKC and MAM are prohibited from having one person simultaneously hold the positions of general counsel and chief compliance officer. 7. State securities regulators will continue the cases and charges against Brian B. Sullivan, Gary S. Stringer and Michele F. Wood, who were named in the States’ proceedings and who have not entered into the consent orders.
8. MKC and MAM are required to fully cooperate in current and future administrative proceedings against Sullivan, Stringer or Wood.
9. James Kelsoe, the fund manager named in the states’ and SEC actions, settled charges with the States and was ordered to pay a total of $500,000.00 ($250,000.00 to States and $250,000.00 to SEC). Furthermore, Kelsoe agreed to the revocation of all of his existing registrations and/or licenses and to an order of permanent bar from involvement in the securities industry. Kelsoe cannot serve as an officer, director, or manager of, or issuer of interests in, a mutual fund, money market fund, pooled-investments or similar securities and investment vehicles which are publicly offered or sold.
Please read the States’ Fund Distribution Plan Notice to Morgan Keegan Investors and Proof of Claim Form carefully; both are available on the States' Fund page and the Claims Process page of this website.
If you have questions, you may call the Morgan Keegan Settlement Help Line at 888-208-9083 or email info@MorganKeeganSettlement.com.