The Labor Department scored a win against Morgan Keegan and Co. Inc., following an investigation that revealed the independent broker-dealer accepted revenue-sharing fees for recommending funds of hedge funds to plan clients.
As a result, Morgan Keegan, now owned by
Raymond James Financial Inc., will pay $633,715 to ten pension plans.
The alleged violations took place between April 2001 and November 2008.
As part of this settlement, Morgan Keegan will have to disclose to plan clients covered by the Employee Retirement Income Security Act of 1974 whether it's acting as a fiduciary. If the firm is indeed acting as a fiduciary, it will have to break down the services that it's providing as such.
Morgan Keegan also will have to share with clients a description of the compensation and fees received from any source.
The broker-dealer will either not collect commissions, or if it does, refund to ERISA plan clients the full amount of payments from third parties.
“This matter was fully reserved for prior to
Raymond James’ acquisition of Morgan Keegan," said Anthea Penrose, spokeswoman for
Raymond James. "The terms of the DOL agreement are Morgan Keegan’s responsibility as they are the only party to the investigation and settlement.”
Morgan Keegan is the latest firm to face an investigation and sanctions under the Employee Benefits Security Administration's Consultant/Adviser Project, an initiative that concentrates on consultants' and advisers' pocketing of improper or undisclosed payments.
The regulator had picked up a handful of notable wins in recent years, including a 2009 settlement with Consulting Services Group and its affiliated broker-dealer Trading Services Group Inc. for nearly $300,000. In 2010, Metropolitan Life Insurance Co. had agreed to pay $13.5 million in conjunction with a joint investigation by the DOL, the FBI and the
Internal Revenue Service.
A report released last October, co-authored by Fred Reish, a partner at Drinker Biddle & Reath LLP, said while the program had been around for several years, activity had been heating up and the DOL seems to be emphasizing reinforcement in light of upcoming rules that would force firms and service providers to reveal their fees to plan clients and participants.
