Predatory Lending - Wednesday, May 7, 2008 15:46 - 0 Comments

Morgan Keegan’s subprime mortgage gamble

As we have seen in recent weeks, the stock market can be a volatile place, especially for the investment firms who decide to gamble in the subprime securities market. For the past several months, the nation has watched as the housing market has continued its plunge to levels not seen since the Great Depression. At the center of attention are the investment firms who invested so heavily in the subprime securities market and the investors who entrusted their money to these firms with the belief their investments were secure. Our law firm has recently taken a very hard look at one such investment firm, Morgan Keegan. Morgan Keegan is a Tennessee-based investment firm that advertised their Select Intermediate and High Income Mutual Funds as investments that would provide high yields without excessive risks. However, the investments were actually made in illiquid securities that are rarely traded and do not have active price quotes that are maintained. When the subprime mortgage crash occurred, these investments suffered substantial losses.

Our clients, as well as other investors, were given the false impression that the funds were a safe and stable investment. The reality is neither fund disclosed in their common prospectus that the bonds were exposed to a risk of heavy concentration in one sector. The prospectus did not disclose that the investors were exposed to an untested, thin market subject to constant instability. Further, the funds violated the investment restriction against investing more than 25% in the same industry (in this case, mortgage backed securities). As a result of such investment practices, Morgan Keegan’s select funds lost a substantial amount of their value, especially when compared to other funds in the same market. More specifically, the Select Intermediate Bond lost 47% of its value while the Select High Income Fund lost 56% of its value.

Our firm is reviewing cases concerning the Morgan Keegan funds, including the Morgan Keegan Select High Income Fund and the Morgan Keegan Select Intermediate Fund. If you have any questions concerning these funds please contact either Roman Shaul or Scarlette Tuley, who are the lawyers in our firm handling these cases. You can either send your inquires to one of the lawyers at P.O. Box 4160, Montgomery, AL 36103 or call our firm toll-free at 800-898-2034.