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U.S. Securities and Exchange Commission

SEC Charges Morgan Keegan for Fraudulent Marketing and Sales of Auction Rate Securities


Washington, D.C., July 21, 2009 — The Securities and Exchange Commission today charged Tennessee-based broker-dealer Morgan Keegan & Company, Inc. for misleading thousands of investors about the liquidity risks associated with auction rate securities (ARS), and the agency is seeking a court order requiring Morgan Keegan to repurchase the illiquid ARS from its customers.

The SEC alleges that Morgan Keegan misrepresented to customers that ARS were safe, highly liquid investments that were comparable to money market funds. Morgan Keegan sold approximately $925 million of ARS to its customers between Nov. 1, 2007, and March 20, 2008, but failed to inform its customers about increased liquidity risks for ARS even after the firm decided to stop supporting the ARS market in February 2008.

“Morgan Keegan was clearly aware that the ARS market was deteriorating, but it went so far as to actually accelerate its ARS sales even after other firms’ ARS auctions began to fail,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “As we’ve done in our enforcement actions against other firms, the SEC is firmly committed to restoring liquidity to Morgan Keegan customers who purchased ARS.”

The SEC’s complaint, filed in U.S. District Court for the Northern District of Georgia, alleges that Morgan Keegan ignored indications that the risk of auction failures had materially increased amid investor concerns about the creditworthiness of ARS insurers, auction failures in certain segments of the ARS market, increased clearing rates for auctions managed by Morgan Keegan and other broker-dealers, and higher than normal ARS inventories at Morgan Keegan.

The SEC is seeking an injunction against Morgan Keegan for violations of the antifraud provisions of the federal securities laws, as well as disgorgement, financial penalties, and other equitable relief for investors.

The SEC appreciates the assistance and cooperation of the Alabama Securities Commission and the New York Attorney General’s Office.

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For more information, contact:

Katherine S. Addleman
Regional Director, SEC’s Atlanta Regional Office
(404) 842-7610

M. Graham Loomis
Assistant Regional Director, SEC’s Atlanta Regional Office
(404) 842-7622

William P. Hicks
Regional Trial Counsel, SEC’s Atlanta Regional Office
(404) 842-7675



Modified: 07/21/2009