Morgan Keegan & Co. Inc., a subsidiary of Regions Financial (RF), disclosed this week in RF’s Form 10-Q filing with the SEC that the SEC staff issued it a Wells Notice in March indicating that it intends to recommend enforcement action to the Commission. According to RF,
In March 2009, Morgan Keegan & Company, Inc. (“Morgan Keegan”), a wholly-owned subsidiary of Regions, received a Wells Notice from the Securities and Exchange Commission’s Atlanta Regional Office related to auction rate securities (“ARS”) indicating that the SEC staff intends to recommend that the Commission take civil action against Morgan Keegan. We believe the SEC investigation is part of its industry-wide effort to provide liquidity to purchasers of ARS following the February 2008 collapse of the market for those securities. The notice indicates that the SEC’s investigation of Morgan Keegan relates to the adequacy of disclosure of the liquidity risks associated with ARS and whether the firm sold a significant volume of ARS after its ability to support auctions was diminished. A Wells Notice is not a formal allegation or proof of wrongdoing. Morgan Keegan has cooperated extensively with the SEC and initiated a voluntary program to repurchase ARS it underwrote and sold to the firm’s retail customers. Regions and Morgan Keegan will work to resolve the matter by continuing to cooperate fully with the SEC. Although it is not possible to predict the ultimate resolution or financial liability with respect to this matter, management is currently of the opinion that the outcome of this matter will not have a material effect on Regions’ business, consolidated financial position or results of operations.
Morgan Keegan spokeswoman Kathy Ridley stated that the firm has cooperated extensively with the SEC regarding the auction-rate issue. “We’ve worked pretty aggressively with issuers on securities that we underwrote in working to refund a significant portion of those outstanding issues,” Ridley said. “We have also initiated a voluntary repurchase program focused on holdings in individual investor accounts, and we’ve bought back about $28 million in securities so far this year.”