Press Release: SEC Charges Morgan Keegan for Fraudulent Marketing and Sales of Auction Rate Securities; 2009-166; July 21, 2009
The SEC charged Morgan Keegan & Company with fraudulently marketing $925 million in auction rate securities as safe and liquid investments comparable to money market funds, despite knowing of deteriorating market conditions and halting its own market support in February 2008, and is seeking court-ordered repurchases, disgorgement, penalties, and an injunction for violating federal antifraud securities laws.
Between November 2007 and March 2008, Morgan Keegan sold approximately $925 million in auction rate securities (ARS) to retail investors while misrepresenting them as safe, highly liquid investments akin to money market funds. The firm concealed rising liquidity risks—including auction failures, increased inventories, and declining insurer creditworthiness—even after it stopped supporting the ARS market in February 2008 and continued accelerating sales. The SEC filed a complaint in the Northern District of Georgia, seeking an injunction, disgorgement, financial penalties, and a court order requiring Morgan Keegan to repurchase the illiquid ARS from customers for violating federal antifraud provisions.
The SEC charged Morgan Keegan & Company with fraudulent marketing and sales of auction rate securities (ARS), alleging the firm misled thousands of investors by portraying ARS as safe, liquid investments comparable to money market funds. Between November 2007 and March 2008, Morgan Keegan sold approximately $925 million in ARS to retail customers while deliberately concealing deteriorating market conditions, including auction failures, rising inventories, and weakening creditworthiness of ARS insurers. Even after deciding to stop supporting the ARS market in February 2008, the firm continued to accelerate sales, ignoring clear warning signs that liquidity was collapsing. The SEC filed its complaint in U.S. District Court for the Northern District of Georgia, seeking an injunction, disgorgement of ill-gotten gains, financial penalties, and a court order compelling Morgan Keegan to repurchase the now-illiquid ARS from affected investors. The agency emphasized that Morgan Keegan’s conduct violated the antifraud provisions of federal securities laws. The SEC acknowledged the cooperation of the Alabama Securities Commission and the New York Attorney General’s Office in uncovering the misconduct. This case was part of a broader enforcement effort targeting broker-dealers who misled investors during the ARS market collapse.
Exhibits & Attached Documents (1)
Extracted insights
- $925.00M $925 million $100M–$1B
- organization Alabama Securities Commission
- person katherine s. addleman
- person m. graham loomis
- person morgan keegan
- organization Morgan Keegan & Company, Inc.
- organization New York Attorney General’s Office
- person robert khuzami
- agency Securities and Exchange Commission
- organization U.S. District Court For The Northern District Of Georgia
- person William P. Hicks
- SEC charged Morgan Keegan & Company, Inc. for fraudulent marketing and sales of auction rate securities
- SEC is seeking a court order requiring Morgan Keegan to repurchase the illiquid ARS from its customers
- Morgan Keegan sold approximately $925 million of auction rate securities to its customers between Nov. 1, 2007 and March 20, 2008
- Morgan Keegan was aware that the ARS market was deteriorating and accelerated its ARS sales after other firms’ auctions began to fail
- SEC is seeking an injunction against Morgan Keegan for violations of the antifraud provisions of the federal securities laws
- SEC is seeking disgorgement, financial penalties, and other equitable relief for investors
SEC Charges Morgan Keegan for Fraudulent Marketing and Sales of Auction Rate Securities FOR IMMEDIATE RELEASE 2009-166 Washington, D.C., July 21, 2009 — The Securities and Exchange Commission today charged Tennessee-based broker-dealer Morgan Keegan & Company, Inc. for misleading thousands of investors about the liquidity risks associated with auction rate securities (ARS), and the agency is seeking a court order requiring Morgan Keegan to repurchase the illiquid ARS from its customers. Additional Materials Litigation Release No. 21143 SEC Complaint The SEC alleges that Morgan Keegan misrepresented to customers that ARS were safe, highly liquid investments that were comparable to money market funds. Morgan Keegan sold approximately $925 million of ARS to its customers between Nov. 1, 2007, and March 20, 2008, but failed to inform its customers about increased liquidity risks for ARS even after the firm decided to stop supporting the ARS market in February 2008. “Morgan Keegan was clearly aware that the ARS market was deteriorating, but it went so far as to actually accelerate its ARS sales even after other firms’ ARS auctions began to fail,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “As we’ve done in our enforcement actions against other firms, the SEC is firmly committed to restoring liquidity to Morgan Keegan customers who purchased ARS.” The SEC’s complaint, filed in U.S. District Court for the Northern District of Georgia, alleges that Morgan Keegan ignored indications that the risk of auction failures had materially increased amid investor concerns about the creditworthiness of ARS insurers, auction failures in certain segments of the ARS market, increased clearing rates for auctions managed by Morgan Keegan and other broker-dealers, and higher than normal ARS inventories at Morgan Keegan. The SEC is seeking an injunction against Morgan Keegan for violations of the antifraud provisions of the federal securities laws, as well as disgorgement, financial penalties, and other equitable relief for investors. The SEC appreciates the assistance and cooperation of the Alabama Securities Commission and the New York Attorney General’s Office. # # # For more information, contact: Katherine S. Addleman Regional Director, SEC’s Atlanta Regional Office (404) 842-7610 M. Graham Loomis Assistant Regional Director, SEC’s Atlanta Regional Office (404) 842-7622 William P. Hicks Regional Trial Counsel, SEC’s Atlanta Regional Office (404) 842-7675 http://www.sec.gov/news/press/2009/2009-166.htm Home | Previous Page Modified: 07/21/2009
SEC Charges Morgan Keegan for Fraudulent Marketing and Sales of Auction Rate Securities FOR IMMEDIATE RELEASE 2009-166 Washington, D.C., July 21, 2009 — The Securities and Exchange Commission today charged Tennessee-based broker-dealer Morgan Keegan & Company, Inc. for misleading thousands of investors about the liquidity risks associated with auction rate securities (ARS), and the agency is seeking a court order requiring Morgan Keegan to repurchase the illiquid ARS from its customers. Additional Materials Litigation Release No. 21143 SEC Complaint The SEC alleges that Morgan Keegan misrepresented to customers that ARS were safe, highly liquid investments that were comparable to money market funds. Morgan Keegan sold approximately $925 million of ARS to its customers between Nov. 1, 2007, and March 20, 2008, but failed to inform its customers about increased liquidity risks for ARS even after the firm decided to stop supporting the ARS market in February 2008. “Morgan Keegan was clearly aware that the ARS market was deteriorating, but it went so far as to actually accelerate its ARS sales even after other firms’ ARS auctions began to fail,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “As we’ve done in our enforcement actions against other firms, the SEC is firmly committed to restoring liquidity to Morgan Keegan customers who purchased ARS.” The SEC’s complaint, filed in U.S. District Court for the Northern District of Georgia, alleges that Morgan Keegan ignored indications that the risk of auction failures had materially increased amid investor concerns about the creditworthiness of ARS insurers, auction failures in certain segments of the ARS market, increased clearing rates for auctions managed by Morgan Keegan and other broker-dealers, and higher than normal ARS inventories at Morgan Keegan. The SEC is seeking an injunction against Morgan Keegan for violations of the antifraud provisions of the federal securities laws, as well as disgorgement, financial penalties, and other equitable relief for investors. The SEC appreciates the assistance and cooperation of the Alabama Securities Commission and the New York Attorney General’s Office. # # # For more information, contact: Katherine S. Addleman Regional Director, SEC’s Atlanta Regional Office (404) 842-7610 M. Graham Loomis Assistant Regional Director, SEC’s Atlanta Regional Office (404) 842-7622 William P. Hicks Regional Trial Counsel, SEC’s Atlanta Regional Office (404) 842-7675 http://www.sec.gov/news/press/2009/2009-166.htm Home | Previous Page Modified: 07/21/2009