MEMPHIS — Regions Financial Corp. says it will “explore strategic alternatives” for its brokerage and investment banking subsidiary, Morgan Keegan & Company, Inc., and its asset management subsidiary, Morgan Asset Management, after reaching a $200-million settlement with the Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA) and five states, including Mississippi.
With these regulatory matters settled and as part of its ongoing capital planning process, Regions has retained Goldman, Sachs & Co. to explore potential strategic alternatives for Morgan Keegan. Morgan Asset Management and Regions Morgan Keegan Trust are not included in this review.
Regions president and CEO Grayson Hall said, “Morgan Keegan has been a subsidiary of Regions since 2001 and is a leading brokerage and investment banking firm based in the Southeast and a very valuable franchise. However, the resolution of this legacy regulatory matter gives Regions greater flexibility with respect to the Morgan Keegan franchise and the ability to explore opportunities that are consistent with our strategic and capital planning initiatives.
“Regions is committed to continuing to provide a full range of products and services seamlessly to its customers, including through a continuing relationship with Morgan Keegan.”
The SEC, FINRA and regulators in five states accused Morgan Keegan of reckless business practices that led to an estimated $1.5 billion in losses to investors.
As part of the settlement, Morgan Keegan and Morgan Asset Management agreed to pay $210 million, of which $200 million will be placed into two Fair Funds for the benefit of investors in the RMK Funds in any state. RMK Funds are certain mutual funds and closed-end funds.
According to Regions, Morgan Asset Management divested the RMK Funds business in 2008.
The settlement details are:
• The $210-million payment, which consists of $200 million paid into two Fair Funds, one administered under instructions from the SEC, and another administered under instructions from the states, with $100 million to be paid into each of the two funds
• A penalty of up to $10 million to be paid to those states that join in the settlement. The five states initially included in the settlement are Alabama, Kentucky, Mississippi, South Carolina and Tennessee. The $10 million state penalty will be shared among any participating states.
• An administrator will identify the investors in the Funds who suffered losses, evaluate investor claims and distribute the funds. The Fair Funds are available to investors in every state without regard to whether their state is participating in the settlement.
Source: Regions; AP