Morgan Asset Management, Inc. : Regions Morgan Keegan Select Funds Summary: A law firm press release dated October 13, 2008 stated that the lawsuit, originally captioned Richard A. Atkinson, M.D., et al. v. Morgan Asset Management, Inc., et al., Case No. 2:07-cv-02784-SHM-dkv (W.D. Tenn.), was filed by four law firms: Apperson, Crump & Maxwell, PLC; Head, Seifert & Vander Weide, P.A.; Lockridge Grindal Nauen P.L.L.P.; and Zimmerman Reed, P.L.L.P. On February 4, 2008, an Amended Complaint was filed adding Regions Bank and two individuals as defendants and adding claims on behalf of investors who purchased shares of the Regions Morgan Keegan Select Short Term Bond Fund. The Amended Complaint asserts, among other things, that the defendants violated, or are otherwise liable under, sections 11, 12 and 15 of the federal Securities Act of 1933 and section 34(b) of the Investment Company Act of 1940 during the Class Period, as may be extended as discussed above. Plaintiffs may also add a claim under section 10(b) of the Securities Exchange Act of 1934. On September 23, 2008, the Federal District Court for the Western District of Tennessee entered an Order consolidating three cases brought on behalf of the shareholders in the Regions Morgan Keegan Select Short Term Bond Fund, Regions Morgan Keegan Select Intermediate Bond Fund and Regions Morgan Keegan Select High Income Fund. The cases consolidated were Richard A. Atkinson, M.D., et al. v. Morgan Asset Management, Inc., et al., Case No. 2:07-cv-02784-SHM-dkv (W.D. Tenn.), Elizabeth P. Willis, et al. v. Morgan Keegan & Co., Inc., et al., Case No. 2:07-cv-02830-SHM-dkv (W.D. Tenn.) and Larry F. and Charlotte C. Hartman v. Morgan Keegan & Co., Inc., et al., Case No. 2:08 cv-02071-SHM-dkv (W.D. Tenn.). The District Court also ordered that the consolidated matter shall be identified as In re Regions Morgan Keegan Open-End Mutual Fund Litigation, Civil Action No. 2:07-cv-02784-SHM-dkv (W.D. Tenn). Because the District Court determined that proper notice had not previously been communicated to the shareholders of the Regions Morgan Keegan Select Short Term Bond Fund, the District Court also ordered plaintiffs to republish notice concerning the Amended Complaint, now referred to as In re Regions Morgan Keegan Open-End Mutual Fund Litigation, Civil Action No. 2:07-cv-2784-SHM-dkv (the "Class Action").
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.
Specifically, the Complaint alleges that Funds and the defendants misrepresented or failed to disclose material facts relating to (i) the nature of the risk being assumed by an investment in the Funds, (ii) the illiquidity of certain securities in which the Funds invested, (iii) the extent to which the Funds' portfolios contained securities that were illiquid or exhibited the characteristics of illiquid securities so that they were highly vulnerable to suddenly becoming unsalable at the prices at which they were being carried on the Funds' records, (iv) the extent to which the Funds' portfolios were subject to fair value procedures, (v) the extent to which the values of such securities, and, consequently, the net asset values of the Funds, were based on estimates of value and the uncertainty inherent in such estimated values, and (vi) the concentration of investments in a single industry in excess of investment restrictions to which the Funds were subject.
The complaint further alleges that as of November 23, 2007, Morningstar reported RHIIX's NAV was down almost 55% year-to-date; from December 31, 2006 until November 30, 2007, the RHIIX's NAV per share declined from $10.14 to $3.91 for a loss of $6.23 per share, or 61.4%. For the same period, Morningstar reported MKIBX's NAV was down over 43%; MKIBX's NAV per share declined from $9.93 to $5.07 for a loss of $4.86 per share or 48.9%. The Complaint alleges that these extraordinary losses in share value were caused by the Funds' heavy investment in relatively new types of manufactured or structured fixed income securities that had not been tested through market cycles and by the failure of the Funds to have previously complied with required and disclosed procedures relating to the manner in which the Funds' assets were invested, the liquidity of their assets would be maintained, the lack of liquidity in the Funds' portfolios, the valuation procedures used to price their assets, the uncertainty inherent in the estimated value of their assets, violations of the Funds' investment restrictions on illiquid securities and investments in a single industry, and/or the failure to disclose such breaches and failures and conditions in the Funds' portfolios that rendered them extraordinarily vulnerable to changes in market conditions, far more vulnerable than other intermediate bond and high income funds affected by the same events and conditions in the subprime and other markets in 2007.
The Funds revealed, for the first time, on October 3, 2007 that, as of June 30, 2006, and June 30, 2007, the magnitude of the Funds' securities that were fair valued and were, therefore, illiquid securities. For MKIBX, it was disclosed that 55.8% of its investment securities were fair valued at June 30, 2006, and 50.4% at June 30, 2007. For RHIIX, it was disclosed that 49.5% of its investment securities were fair valued at June 30, 2006, and 59.7% at June 30, 2007.
On December 23, 2008, an Order Granting Motion Of C. Fred Daniels For Extension Of Time To Respond To Rmk Open-End Funds Group’s Motion For Appointment Of Lead Plaintiff And Approval Of Selection Of Lead And Liaison Counsel was entered by the court.
On January 14, 2009, a motion was made to the court to appoint lead plaintiff and lead counsel.
On September 30, 2009, an order was issued granting RMK Open-End Fund group's motion for appointment of lead plaintiff and approval of selection of lead counsel and liaison counsel.
On September 30, 2010, the Court issued an Order Granting In Part and Denying In Part Defendants' Motions to Dismiss the plaintiffs complaint.
The action has been administratively closed on May 26, 2011.
Industry: Investment Services
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