Morgan Keegan, Regions Financial Strike $62 Million Deal to Dodge Mutual Fund Claims

The AmLaw Litigation Daily
10/15/2012


Joel H. Bernstein: settlement is a good result for clients given the "built-in defenses" that mutual funds have at their disposal in securities fraud cases

Labaton's Bernstein told us that the settlement, when added to the $210 million Morgan Keegan forked over to federal and state regulators, "increases the amount available to shareholders by a significant percentage." (The government deal involved seven Morgan Keegan-managed mutual funds, both closed-end and open-end.)

Bernstein also told us that the settlement is a good result for his clients given the "built-in defenses" that mutual funds have at their disposal in securities fraud cases. Mutual funds are often able to attack net asset value estimates, he said, because "the values of notes are not as concrete as the price of stock. . .there can be different quotes by different companies that report on these values." And like many defendants in securities fraud cases brought after the financial crisis, Morgan Keegan may have been able to argue that the subprime crisis, rather than its own conduct, caused investor losses, Bernstein said.