Morgan Keegan and Company Case 12/06/2007
FEBRUARY 2012 - Proposed settlement. According to the Notice:
TO: SHAREHOLDERS OF SEVEN REGIONS MORGAN KEEGAN MUTUAL FUNDS THAT HAD INVESTMENTS JANUARY 1, 2007 THROUGH AND INCLUDING MARCH 31, 2008; THE AFFECTED FUNDS (COLLECTIVELY, THE “FUNDS”) ARE:
• 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”); and
• Regions Morgan Keegan Select Short Term Bond Fund (“Short Term Bond Fund”).
If you satisfy the eligibility criteria described below and wish to receive proceeds of this settlement, you must submit a Proof of Claim Form to the fund administrator, A.B. Data, Ltd. (the “Fund Administrator”), postmarked no later than June 16, 2012 (banks, brokers, and other nominees, please see instructions on Page 4 herein).
The purpose of this Distribution Plan Notice1 to Morgan Keegan Investors (“Notice”) is to inform you that you may be eligible to share in the proceeds of the $100,000,000 fund (the “Distribution Fund”)2 established by the states of Tennessee, Alabama, Mississippi, South Carolina, and Kentucky (“States”) that provides partial restitution resulting from the Consent Orders3 entered into by the States with Morgan Keegan & Company (“MKC”) and Morgan Asset Management (“MAM”) (the “States’ Fund”) and provides you with an opportunity to file a claim. You do not have to be a resident of one of the States listed to participate.
There is also a Securities and Exchange Commission (SEC or the “Commission”) Fair Fund that was established for $100,300,000 pursuant to Commission Administrative Proceeding File No. 3-13847 (the “SEC Fair Fund”). Although the Commission’s proceeding related to the same Funds as those involved in the States’ case, the SEC case related to different allegations, so the period relating to the SEC Fair Fund loss period includes January 1, 2007 through and including July 31, 2007, which is a subset (smaller period of time) of the States’ Fund Loss Period of January 1, 2007 through and including March 31, 2008.
October 6, 2008 - Class action lawsuit of certain mutual funds.
On Monday, October 6, 2008, a shareholder of Intermediate Fund and a shareholder of Intermediate Fund and RHY Fund have filed a proposed class action lawsuit in the United States District Court for the Western District of Tennessee on behalf of all persons who purchased or otherwise acquired the shares of certain closed-end mutual funds (NYSE:RHY; NYSE:RMA; NYSE:RSF; NYSE:RMH) offered by Regions Morgan Keegan Trust, including shares of the RMK Multi-Sector High Income Fund, Inc. (the “RHY Fund”), the RMK Advantage Income Fund (the “RMA Fund”), the RMK Strategic Income Fund (the “RSF Fund”) and the RMK High Income Fund (the “RMH Fund) (collectively referred to as the “Funds”), pursuant and/or traceable to the Funds’ false and misleading Registration Statements and Prospectuses during the period December 6, 2004 through February 6, 2008 and purchasers of any of the Funds during the period from December 8, 2006 through December 5, 2007. against Morgan Keegan & Co., Inc., Morgan Keegan Asset Management, Inc., Regions Financial Corporation and related companies and officers and directors. The plaintiffs allege violations of Federal Securities Laws by issuing materially false and misleading statements regarding the Funds
December 6, 2007 Class action filings
According to a press release dated December 6, 2007, a class action lawsuit has been filed against Morgan Asset Management, Inc., Morgan Keegan & Company, Inc., MK Holding, Inc., Regions Financial Corporation (NYSE:RF), PricewaterhouseCoopers LLP, and certain individuals, officers and directors associated with the above entities on behalf of investors who purchased shares of the Regions Morgan Keegan Select Intermediate Bond Fund (”MKIBX”) and Regions Morgan Keegan Select High Income Fund (”RHIIX").
The complaints charge the Funds’ registrants, the Funds’ administrator, Morgan Keegan & Company, Inc. (”Morgan Keegan”), the Funds’ adviser, Morgan Keegan Asset Management, Inc., Regions Financial Corp. and certain of Morgan Keegan’s officers and/or directors with violations of the Securities Act of 1933 and the Securities Exchange Act of 1934. The complaints allege that defendants issued materially false and misleading statements regarding the Funds’ portfolios and financial results. As a result of defendants’ false statements, the Funds’ shares traded at artificially inflated prices. According to the complaints, portions of the Funds’ portfolios were invested in collateralized debt obligations (”CDOs”), including CDOs backed by subprime mortgages to high-risk borrowers. For years, shares of the Funds traded within narrow ranges. Then in early March 2007, as the subprime crisis began to emerge, the Funds began to trend lower as the market learned of their exposure to the subprime market. Nonetheless, shares of the Funds continued to trade at artificially inflated prices as the full extent of the Funds’ exposure had not yet been revealed. As late as the summer of 2007, as the housing and credit crisis deepened, the Funds continued to play down and conceal the Funds’ growing exposure to the problems in the subprime market. Beginning in early July 2007, the Funds began to acknowledge serious problems in their portfolios related to the Funds’ exposure to the subprime market. On November 7, 2007, Portfolio Manager James C. Kelsoe wrote a letter to investors in which he acknowledged further problems the portfolios faced due to the deterioration in the housing sector and the subprime mortgage crisis. The shares continued to collapse subsequent to these announcements as the impact of the risky holdings in the Funds’ portfolios became more apparent to the market. As a result of these disclosures, the price of the Funds’ shares collapsed. For example, RMH Fund shares closed at $4.20 per share on February 6, 2007, a decline of 70% from early July 2007. According to the complaints, the true facts which were omitted from the Registration Statements/Prospectuses or were known by the defendants but concealed from the investing public during the Class Period were as follows: (a) the Funds lacked adequate controls and hedges to minimize the risk of loss from mortgage delinquencies which affected a large part of their portfolios; (b) the extent of the Funds’ liquidity risk due to the illiquid nature of a large portion of the Funds’ portfolios was omitted; (c) the extent of the Funds’ risk exposure to mortgage-backed assets was misstated; and (d) the extent to which the Funds’ portfolios were subject to fair value procedures was misstated. Plaintiffs seek to recover damages on behalf of all persons who purchased or otherwise acquired shares of the Funds pursuant and/or traceable to the Funds’ Registration Statements and Prospectuses or who purchased shares of the Funds during the Class Period.