WASHINGTON (CN) – Morgan Keegan & Co. and Morgan Asset Management will pay $200 million to settle charges of fraud in subprime mortgage-backed securities, the SEC said.
Morgan Keegan is based in Memphis. Morgan Asset, based in Birmingham, Ala., is a wholly owned subsidiary of MK Holding, which is a wholly owned subsidiary of Regions Financial Corp.
The SEC also sued two Morgan Keegan executives, former portfolio manager James C. Kelsoe Jr. and Comptroller Joseph Thompson Weller.
The SEC order settling the charges found that Morgan Keegan failed to employ reasonable pricing procedures and did not calculate accurate net asset values for the funds it sold, and that it did this “exactly when investors needed it most,” during the subprime mortgage meltdown, the SEC said in announcing the settlement.
Morgan Keegan will have to disgorge $25 million and pay a $75 million penalty to the SEC, all of which will go into a “Fair Fund” for investors it hurt. It will pay another $100 million into a similar state fund.
Kelsoe must pay $500,000 and was barred from the securities industry, and Weller was fined $50,000.