July 22, 2024

DealBook: Morgan Keegan Settles Mortgage Securities Case and Is Put on the Block

Robert Khuzami, director of the S.E.C.’s enforcement division, in February.Lucas Jackson/Reuters Robert Khuzami, director of the S.E.C.’s enforcement division, in February.

As financial regulators announced a $200 million settlement with Morgan Keegan in a mortgage securities case, its parent company put the brokerage firm on the block.

Morgan Keegan’s agreement with the Securities and Exchange Commission and the Financial Industry Regulatory Authority resolves a civil action brought last year by the S.E.C. accusing it and two of its executives of defrauding investors by inflating the value of mortgage-backed securities in its mortgage bond funds.

“The falsification of fund values misrepresented critical information exactly when investors needed it most – when the subprime mortgage meltdown was impacting the funds,” Robert Khuzami, director of the S.E.C.’s enforcement division, said in a statement. “Such misconduct does grievous harm to investors.”

State regulators from Alabama, Kentucky, Mississippi, South Carolina and Tennessee were involved in the settlement.

Morgan Keegan’s parent, Regions Financial, announced that it was putting Morgan Keegan up for sale in a effort to raise money to repay its loan from the government’s Troubled Asset Relief Program.

Regions still owes the government $3.5 billion, more than any other bank that remains in the bailout program.

“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,” Grayson Hall, Regions’ chief executive, said in a statement.

The bank has retained Goldman Sachs to advise it on a sale.

Regions agreed in December 2000 to acquire Morgan Keegan for $789 million. Based in Memphis, Morgan Keegan has more than 300 office in 20 states.

Regions, which has a market value of $7.9 billion, has itself been viewed as a possible takeover target. In the wake of PNC Financial Services’ $3.45 billion deal for the United States subsidiary of the Royal Bank of Canada this week, Bank of America-Merrill Lynch analysts noted the speculation and wrote that Regions “could potentially provide considerable upside in a takeout” if it was to repay TARP by year-end.

Article source: http://feeds.nytimes.com/click.phdo?i=f601603fc25a7d9cb810f4e262bc4483

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