By GREG BLUESTEIN
ATLANTA — Five states and federal regulators have reached a $200 million settlement with Morgan Keegan & Co. over allegations that its brokerage firm engaged in reckless business practices that led to an estimated $1.5 billion in losses to investors.
William Hicks of the U.S. Securities and Exchange Commission announced the deal today. State regulators from Alabama, Kentucky, Mississippi, South Carolina and Tennessee were involved in the settlement, as well as the Financial Industry Regulatory Authority.
The regulators say Morgan Keegan overstated the value of funds backed by subprime mortgages and used false and misleading sales materials.
James Kelsoe, who managed the funds targeted by regulators, agreed to pay $500,000 to settle claims. He is barred from the securities industry.
SEC estimates there were more than $1.5 billion in losses and the SEC penalty does not preclude civil lawsuits from investors harmed by Morgan Keegan bond funds.
Two Regions Financial Corp. also announced today that with these regulatory matters settled, the company has put Morgan Keegan up for sale. Regions said it has retained Goldman, Sachs & Co. “to explore potential strategic alternatives for Morgan Keegan as Regions evaluates how best to deploy its capital to increase shareholder value.”
Morgan Keegan is owned by Birmingham, Ala.-based Regions Financial Corp.