Morgan Keegan Mutual Fund Claim Results in $1.5M Arbitration Award

A former pro basketball player has been awarded $1.46 million in an arbitration claim over investment losses associated with certain Morgan Keegan mutual funds, which suffered dramatic losses as a result of risky sub-prime mortgage-backed securities.

An arbitration panel through the Financial Industry Regulatory Authority (FINRA) ruled in favor of former Los Angeles Lakers player Horace Grace on Friday, in a Morgan Keegan mutual fund arbitration claim that alleged the brokerage firm failed to properly disclose the amount of risk associated with mutual funds that were marketed as being conservative and relatively safe investments.

A number of similar Morgan Keegan lawsuits and investor claims have been filed against the brokerage arm of Regions Financial Corp. since the collapse of the mortgage market in 2007. It has been estimated that Morgan Keegan mutual fund settlements and arbitration awards may eventually cost the brokerage firm more than $200 million.

Grant was invested in four Morgan Keegan mutual funds, which fell by an average of 58%. However, similar mutual funds managed by other firms, which were not as heavily tied to sub-prime mortgage-backed holdings, only fell an average of 6.9% over the same period.

Morgan Keegan sold the funds as conservative retiree investments that were designed to protect the principal investment, accord to Grant’s claims. The former NBA player had invested about $3 million in Regions Morgan Keegan Multi-Sector Income Fund, Regions Morgan Keegan High Income Fund, Regions Morgan Keegan Strategic Income Fund and Regions Morgan Keegan Advantage Income Fund.

The investor arbitration panel awarded virtually all of Grant’s losses, in what is believed to be the largest award so far for an investor who has filed a claim for Morgan Keegan losses. FINRA has heard about 60 claims against Morgan Keegan, and investors have been successful in recovering portions of their losses in about half of those cases. Hundreds of other cases are still pending against the brokerage firm, and Morgan Keegan mutual fund loss lawyers are continuing to review potential claims for investors who were told their money was being placed in conservative investments.