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U.S. Securities and Exchange Commission

SEC Charges Regions Bank for Role in Offering Fraud Harming Latin American Investors


Washington, D.C., Sept. 21, 2009 — The Securities and Exchange Commission today charged Alabama-based Regions Bank for its role in an offering fraud that victimized thousands of investors predominantly in Latin America.

The SEC alleges that Regions Bank and its predecessor were a key selling point in the investment scheme because the relationship with a U.S. bank gave Latin American investors the impression that their funds would be secure.

The SEC previously charged unregistered broker-dealers U.S. Pension Trust Corp. and U.S. College Trust Corp. (USPT) for deceptively charging investors exorbitant, undisclosed commissions and fees in the sale of mutual funds through a series of investment plans. Regions Bank served as trustee of the investment plans.

Regions Bank agreed to settle the SEC's charges by consenting to the entry of a cease-and-desist order and payment of a $1 million penalty that will be placed into a Fair Fund to compensate harmed investors in the USPT offering fraud.

"Regions Bank provided a false air of legitimacy to this scheme," said Glenn S. Gordon, Associate Director of the SEC's Miami Regional Office. "Regions Bank was aware or should have been aware of USPT's deceptive sales practices, yet agreed to participate in these investment plans and associate its name and reputation with USPT."

According to the SEC's complaint, filed in the Southern District of Florida, Regions Bank and its predecessor Union Planters Bank served as trustee of investment plans since October 2001. The investment plans gave investors a choice of making either annual contributions or a single, lump-sum contribution. Until March 2006, USPT did not disclose to investors that it subtracted substantial amounts of their contributions for payment of sales commissions and other fees. USPT deducted up to 85 percent of initial contributions in the annual plans and as much as 18 percent in the single contribution plans. The SEC alleges that USPT has illicitly raised at least $255 million from more than 14,000 investors.

The SEC alleges that Regions Bank allowed USPT to use its name in marketing materials, prepared a promotional video that was posted on USPT's Web site, and sent representatives to Latin America to meet with sales agents and prospective investors to explain Regions Bank's role as trustee. Regions entered into individual trust relationships with all investors, processed their contributions, and purchased the selected mutual funds for them.

However, when Regions Bank sent investors confirming certificates, the SEC alleges that it failed to disclose the amounts taken out for fees and commissions. According to the SEC's complaint, Regions Bank's own Trust Agreement and Trust Summary also were misleading and failed to disclose the nature and amounts of the commissions and fees charged investors (except for Regions Bank's trust fees). Regions Bank stopped accepting new USPT investor trust relationships in January 2008, and stopped accepting additional contributions under existing plans in August 2009.

The SEC instituted settled cease-and-desist proceedings against Regions Bank directing it to cease and desist from committing or causing any violations of Sections 17(a)(2) and (3) of the Securities Act of 1933 and from causing USPT's violations of Section 15(a)(1) of the Exchange Act of 1934. Contemporaneously with the issuance of the settled cease-and-desist Order, the SEC also filed a settled civil action in which Regions Bank agreed to pay the $1 million penalty that will be placed into a Fair Fund.

The SEC's investigation is continuing.

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For more information about this enforcement action, contact:

Glenn S. Gordon
Associate Regional Director, SEC Miami Regional Office

Teresa J. Verges
Assistant Regional Director, SEC Miami Regional Office



Modified: 05/21/2010