PDF: Morgan Keegan notice
CLEVELAND, Tenn. – State and federal authorities announced Wednesday they are making inquiries into bond activity by Morgan Keegan & Co. and Morgan Asset Management.
Morgan Keegan, through its Knoxville subsidiary Cumberland Securities, is the financial agent for Cleveland and Bradley County, among many other local governments in Tennessee.
The Securities Division of the Tennessee Department of Commerce and Insurance announced Wednesday it was serving “the notice required under the law as a prerequisite to the formal filing of a petition.”
Other states, including Mississippi, Alabama, Kentucky and South Carolina, and federal regulators are taking similar actions against the companies and some of their employees.
Morgan Keegan and Cumberland Securities officials could not be reached for comment Wednesday.
According to the announcement, the investigation centers on six proprietary bond funds sold by Morgan Keegan broker-dealer agents to about 13,000 customers nationwide. Those bond funds lost about $2 billion in value between March 31, 2007, and March 31, 2008, the state said.
MORGAN KEEGAN ALLEGATIONSTennessee and federal agencies are saying that Morgan Keegan:* Made material omissions and misrepresentations in marketing materials* Made material omissions and misrepresentations in regulatory filings* Withheld information from and misrepresented information concerning the funds to the Morgan Keegan sales force* Provided preferential treatment to certain customers* Failed to make suitable recommendations concerning purchase and concentration of the funds in customer accounts* Failed to adequately supervise their employees* Obstructed the due diligence process.Source: Tennessee Department of Commerce and Insurance
Tennessee Department of Commerce and Insurance spokeswoman Shannon Ashford would not provide specifics about the investigation, citing state confidentiality laws.
Some Cleveland City Council and Bradley County Commission members have been critical of Morgan Keegan’s role over the past year. The company’s role in Bradley County’s investment policies has become an issue in the county mayor’s race.
In a statement Wednesday, County Commissioner Lisa Stanbery, a candidate for county mayor, said that “the alarm that the state is sounding about Morgan Keegan is the same alarm I’ve been sounding about this company on a local level through the county commission for the last three years.”
She added, “This company’s business tactics are the very reason why I have asked for a new debt policy in Bradley County.”
County Mayor D. Gary Davis said he could not comment without more detailed information. But, he said, Morgan Keegan only acts as an agent to sell Bradley County’s bonds and the county has no investments with the company.
Chris Weir, also a candidate for county mayor, said it would be inappropriate to comment on an investigation just getting started.
“However, I hope this acts as a good wake-up call and reminder that, as a government, we are entrusted by the taxpayers to act responsibly and always be very guarded when dealing with their tax dollars,” he said.
Cleveland City Manager Janice Casteel was in the middle of annual budget preparations Wednesday and unable to comment.