BH&F Blog

The securities law firm of Burke, Harvey & Frankowski, LLC (www.bhflegal.com) announced today that it filed another arbitration claim against Morgan Keegan on behalf of an investor that lost over four million dollars. The arbitration Statement of Claim, filed with the FINRA (Financial Industry Regulatory Authority) Office of Dispute Resolution, alleges damages relating to the sale of unsuitable bond funds, including the RMK High Income Fund (RMH), the RMK Multi-Sector High Income Fund (RHY), the RMK Advantage Income Fund (RMA), the RMK Strategic Income Fund (RSF), and the Regions MK Select High Income Fund (MKHIX).

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Burke, Harvey & Frankowski, LLC and Mark & Associates, P.C. announce that they have filed an arbitration request with the Financial Industry Regulation Authority "FINRA" (FINRA Dispute Number 08-01562) on behalf of a client of Morgan Keegan who lost in excess of $104,000 after investing in two Morgan Keegan Bond Funds, Morgan Keegan Multi-Sector High Income Fund (NYSE: RHY) and Morgan Keegan Select Intermediate Bond Fund (RIBCX). The arbitration request's Statement of Claim alleges that Morgan Keegan violated financial rules and regulations, state and federal securities laws and Florida common law, by making materially false and misleading statements and distributing untrue information about the risks of these funds to regulators and investors. Morgan Keegan & Company, Inc. is a subsidiary of Regions Financial Corp (NYSE: RF).

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Robert Pear of the New York Times reports that nursing home inspectors routinely overlook or minimize problems that pose a serious, immediate threat to patients, Congressional investigators say in a new report. In the report, to be issued on Thursday, the investigators, from the Government Accountability Office, say they have found widespread “understatement of deficiencies,” including malnutrition, severe bedsores, overuse of prescription medications and abuse of nursing home residents.

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Diya Gullapalli of the WSJ reports that Charles Schwab Corp. is offering settlements to investors in its Schwab YieldPlus Fund, a supposedly conservative fund that is down 26% this year.

The offers represent pennies on the dollar for losses suffered by some investors, according to plaintiffs attorneys, who seek a class action against Schwab. Schwab declined to comment, citing pending litigation. YieldPlus is an ultra-short bond fund that offered high yields, enticing investors and helping it grow rapidly. At its peak last year, it had more than $13 billion in assets.

YieldPlus bet heavily on mortgage-related securities, and when those securities shrivelled from the subprime-mortgage crisis, so did the fund. Investors have been pulling out money; assets are down to $1.5 billion.

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Andy Meek of the Dailey News reports that over the past several months, federal lawsuits have mounted in West Tennessee on behalf of investors who suffered large losses in a group of beleaguered Regions Morgan Keegan mutual funds. During that time, the U.S. Securities and Exchange Commission has requested information about the low-performing funds from Regions Financial Corp., the parent company of Memphis-based Morgan Keegan. And investors from around the country have peppered the Financial Industry Regulatory Authority with requests for arbitration related to the funds. But even before most of those things occurred, the Memphis brokerage firm's asset management unit had made up its mind. Its group of mutual funds overseen by money manager Jim Kelsoe was beginning to look like a financial sinkhole and a public relations nightmare. And they had to go. So in late 2007, directors of the funds began negotiating with New York-based Hyperion Brookfield Asset Management over how to transfer management of the funds and what would occur after a handoff. That history is spelled out in a regulatory document Morgan Keegan filed Friday.

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Elizabeth Brown of AARP Bulletin Today reports that Jennifer Coldren's 90-year-old grandmother, who suffers from dementia, was assaulted and raped by an employee at her residential care facility in 2006. The 45-year-old attacker had a criminal record and previous allegations of inappropriate sexual conduct. "It was his third day on the floor," says Coldren. The attacker is now serving up to 30 years in prison. While the Rome, N.Y., facility where Coldren's grandmother lived does conduct criminal background checks—as required by state law—employees are allowed to work while waiting for the results. Federal law doesn't require long-term care facilities to conduct national criminal background checks. And when facilities do perform them—either voluntarily or because of state law—the results can take up to four months, which can put residents at risk.

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Joseph A. Giannone of Reuters reports that JPMorgan Chase & Co could cut as many as 4,000 of its own employees worldwide as the bank prepares to take on staff from Bear Stearns Cos at the same time it deals with turmoil in financial markets, people familiar with the situation said on Tuesday. In addition to roughly 2,000 JPMorgan employees who will be replaced by counterparts acquired through its takeover of Bear Stearns, the sources said that an additional 1,000 to 2,000 JPMorgan employees may lose their jobs because of the slowdown in investment banking activity and credit market crisis.

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Carol Curtis of Securitiesindustry.com reports that JP Morgan Chase & Co. has received notice from the Securities and Exchange Commission that the agency is considering civil charges related to bidding in various instruments tied to municipal bonds. In a litigation footnote contained in a report filed Monday with the SEC, JP Morgan said that on March 18 the staff of the commission’s Philadelphia regional office issued a Wells Notice advising JP Morgan Securities that it is “considering recommending an enforcement action” for violation of federal securities laws.

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Scott Lanman of Bloomberg reports that Federal Reserve Chairman Ben S. Bernanke lunched on March 11 with a Who's Who of Wall Street leaders, including JPMorgan Chase & Co.'s Jamie Dimon, three days before the central bank rescued Bear Stearns Cos. from bankruptcy.

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Patricia A. Gorham, S. Lawrence Polk and Terry R. Weiss report that during this year's conference held on March 30 - April 2, FINRA and SEC officials provided numerous insights into the ongoing regulatory concerns in the subprime, structured product and credit markets. It was widely reported that the SEC has formed a "subprime working group" staffed by 100 attorneys and is actively investigating a range of issues related to structured products, with an emphasis on valuation, disclosure and insider trading. Similarly, FINRA has been conducting a sweep to look into these issues with respect to its member firms. Parallel investigations have also been launched by the Attorneys General in states such as New York, Massachusetts and Ohio.

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PRWEB reports that based on a recently completed study, one law firm has concluded that Bear Stearns employees with substantial losses stand to obtain far greater monetary recoveries by opting out of class actions and proceeding with individual lawsuits against the fallen investment bank.

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Christopher Condon of Bloomberg reports that the last step in James Kelsoe's transformation from top-ranked bond investor to subprime-crisis poster boy may come July 11 when shareholders of his seven funds vote on whether to dump him for a new manager.

The funds, with combined assets of $611 million, have lost an average 67 percent in the past 12 months, prompting investor lawsuits against Kelsoe and his employer, Memphis, Tennessee- based Morgan Asset Management Inc. Assets in his largest fund, Regions Morgan Keegan Select High Income, have plunged to $104 million from a peak of $1.23 billion in 2006.

The funds' meltdown followed three years in which Kelsoe outperformed peers by betting heavily on bonds with below- investment-grade ratings, trading an increased risk of default for yields higher than those on investment-grade debt. He developed what he called in a July 2007 interview an ``intoxication'' for securities backed by subprime mortgages. Then came the hangover.

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Burke, Harvey & Frankowski along with Mark & Associates, P.C. announces that they have filed an arbitration request with the Financial Industry Regulation Authority "FINRA" (FINRA Dispute Number 08-01137) on behalf of a Bear Stearns shareholder which names The Bear Stearns Companies, Inc. (NYSE: BSC - News) and its Chief Executive Officer Alan Schwartz as respondents. The Claimant's Statement of Claim alleges that the Claimant suffered significant financial losses when Bear Stearns' stock precipitously declined, which was the result of the respondents breaching their fiduciary responsibility, omitting material facts, and issuing false and misleading statements.

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Shefali Anand of the WSJ reports that the nation's two worst-performing bond-focused mutual funds over the past year are booting their in-house management in favor of outsiders. Morgan Asset Management Inc., a unit of Regions Financial Corp., announced Monday that it had been replaced last week to oversee these two and five other bond funds for Regions, based in Birmingham. Ala. All the funds were managed by James Kelsoe.

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Emir Efrati of the Wall Street Journal reports that federal prosecutors are stepping up their scrutiny of players in the subprime-mortgage crisis, with a focus on Wall Street firms and mortgage lenders. Prosecutors in the Eastern District of New York in Brooklyn have formed a task force of federal, state and local agencies that will involve as many as 15 law-enforcement agents and investigators. The U.S. attorney for the office, Benton J. Campbell, who supervises about 150 prosecutors, said the group will look into potential crimes ranging from mortgage fraud by brokers to securities fraud, insider trading and accounting fraud.

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