Bloomberg News

Ex-Morgan Keegan Fund Directors Settle SEC Valuation Claims

June 13, 2013

Eight former directors overseeing mutual funds for Morgan Keegan & Co. settled, without paying any penalties, U.S. regulatory claims that they allowed assets backed by subprime mortgages to be overvalued as the housing market collapsed in 2007.

The directors, who didn’t admit or deny the allegations, agreed to cease and desist from committing or causing any future violations of the Investment Company Act, the Securities and Exchange Commission said in an administrative order filed today.

“Our settlement sends a clear warning of our commitment to enforce the duty of mutual fund directors and trustees to closely oversee the process of valuing securities held by their funds,” George Canellos, co-chief of the SEC’s enforcement division, said in a statement.

The eight directors, who were responsible for determining fair value of fund securities that lacked readily available market quotations, delegated valuation tasks to a committee without providing meaningful guidance on how the assets should be priced, the SEC said in a December administrative order against the directors.

The directors, who were based in Alabama and Tennessee, made no meaningful effort to learn how the values were being determined and obtained almost no information explaining why particular values were assigned to portfolio securities, according to the order.

The action followed a related $200 million settlement with Morgan Keegan, a subsidiary of St. Petersburg, Florida-based Raymond James Financial Inc. (RJF:US) in 2011 and sanctions against two employees in 2010.

To contact the reporter on this story: Joshua Gallu in Washington at jgallu@bloomberg.net

To contact the editor responsible for this story: Maura Reynolds at mreynolds34@bloomberg.net


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Companies Mentioned

  • RJF
    (Raymond James Financial Inc)
    • $50.95 USD
    • -0.75
    • -1.47%
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