REGIONS MORGAN KEEGAN SUED IN CLASS ACTION FOR LOSSES IN MUTUAL FUNDS BACKED BY SUBPRIME LOANS
In what can only the beginning of a slew of charges, several Regions Morgan Keegan funds have been named in a class action lawsuit out of Tennessee. Coughlin, Stoia, Geller, Rudman, & Robbins LLP filed a complaint in December naming, among others, the Morgan Keegan Select Fund Inc. and the RMK Multi-Sector High Income Fund, Inc.
The press release highlighted some specifics. “The complaint alleges that parts of the Funds’ portfolios have been invested in collateralized debt obligations (“CDOs”), including CDOs backed by subprime mortgages to higher-risk borrowers… As late of the summer of 2007, as the housing and credit crisis depended, MK Select and the RHY Fund continued to play down and conceal the Funds’ growing exposure to the problems in the subprime market.” It wasn’t until late in 2007 that the Regions Morgan Keegan fund managers fully admitted their risks in the face of the plummeting subprime market.
It is safe to assume that the Regions Morgan Keegan funds are not alone in their exposure to the subprime crisis. Mutual Funds, CDOs, and SIVs across the country bought up subprime debt with the promise of high returns while ignoring the inherent risks. Their casual disregard of the inherent volatility in the subprime mortgage market is sure to lead to further charges.
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