Recently, it has been reported that the SEC lawsuit against Morgan Keegan & Co. has been reinstated by the U.S. Court of Appeals in Atlanta. According to stock fraud lawyers, Morgan Keegan allegedly mislead investors regarding its auction-rate securities liquidity risk. According to the federal appeals court, a trial judge previously incorrectly sided with Morgan Keegan that the verbal comments made by brokers to four Morgan Keegan customers were not “material” omissions or misrepresentations that would, under U.S. Securities law, make the company liable.
Morgan Keegan’s office based in Memphis, Tennessee, was accused of securities fraud and sued by the SEC in 2009. According to securities fraud attorneys, the SEC alleged that from late 2007 through the ARS market collapse in February 2008, Morgan Keegan brokers told customers the auction-rate securities “were as good as cash” in an effort to increase sales.
Stock fraud lawyers know that auction-rate securities are tax-exempt, long-term and taxable bonds and their interest rates are connected to the short-term market. Through ARS, issuers can acquire lower short-term rates on long-term financing. Auction-rate securities were marketed as liquid cash alternatives and considered safe before the global credit crunch severely affected the market. As a result, many investors were left with securities that couldn’t be sold.
Typically consisting of preferred shares and municipal- and student loan-backed bonds, the market for these investments collapsed after dealers refrained from taking part in auctions at which interest rates were regularly reset at intervals of every 7, 28 or 35 days. This information is notwithstanding the alleged omissions and misrepresentations.
The acquisition of Morgan Keegan was recently completed by Raymond James Financial Inc. from Regions Financial Corp. This case can be referenced as SEC v. Morgan Keegan & Co. Inc, 11-13992, U.S. Court of Appeals for the Eleventh Circuit. Now that the case has been reinstated, securities fraud attorneys are watching for further developments.
If you believe you have been the victim of auction-rate securities fraud, find out more about your legal rights and options by contacting a securities fraud attorney at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.