Investor Awarded $1.95M Against Morgan Keegan Over Bond Funds

A Birmingham investor has been awarded $1.95 million in a stock broker arbitration claim against Morgan Keegan & Co., in which it was alleged that the investment firm steered him toward bad investments in sewer bonds for an Alabama county. 

The claim was brought by William Featheringill, a venture capitalist and co-founder of Complete Health. According to the complaint, the brokerage firm misrepresented Jefferson County sewer bonds and convinced him to buy them.

The sewer bonds, as well as other Morgan Keegan bonds, tanked during the 2008 market crash. Jefferson County filed for Chapter 9 bankruptcy protection last year and most of the $3.2 billion in sewer bonds are now in default.

Featheringill filed his claim with the Financial Industry Regulatory Authority (FINRA), seeking $1.95 million in compensatory damages and $5.8 million in punitive damages. FINRA granted his compensatory damages but denied punitive damages. Featheringill also has a $3.5 million lawsuit against Morgan Keegan in federal court.

Morgan Keegan bond funds were heavily invested in the subprime mortgage market, and lost as much as 82% in value after the market imploded. The funds were subsequently taken from Morgan Keegan by its parent company, Regions Financial Corp., and transferred to Hyperion Brookfield Assed Management, Inc., which has since liquidated and closed down two of the funds. Regions sold off Morgan Keegan last month.

Hundreds of Morgan Keegan claims have been filed by individual investors against the brokerage firm. The cases involve several different bond funds, including the RMK Strategic Income Fund, RMK Select High Income Fund and RMK Advantage Fund.

FINRA is a non-governmental regulatory body that handles the resolution of disputes between investors and stockbrokers and other financial firms. It was created in July 2007 as a successor to the National Association of Securities Dealers, to arbitrate stock broker fraud claims that can include charges of breach of contract, breach of fiduciary duty, negligence, misrepresentation, unauthorized trading and other claims that investments were improperly handled.