States reach $200M settlement with Morgan Keegan

Five states, including Mississippi, and federal regulators have reached a $200-million settlement with Morgan Keegan & Co. over allegations that its brokerage firm engaged in reckless business practices that led to an estimated $1.5 billion in losses to investors.

William Hicks of the U.S. Securities and Exchange Commission announced the deal today. State regulators from Alabama, Kentucky, Mississippi, South Carolina and Tennessee were involved in the settlement, as well as the Financial Industry Regulatory Authority.

The regulators say Morgan Keegan overstated the value of funds backed by subprime mortgages and used false and misleading sales materials.

James Kelsoe, who managed the funds targeted by regulators, agreed to pay $500,000 to settle claims. He is barred from the securities industry.

Morgan Keegan is owned by Birmingham, Ala.-based Regions Financial Corp.

Source: AP