The Labor Department has scored a win against Morgan Keegan & Co. Inc., following an investigation revealing that the independent broker-dealer accepted payments for recommending funds of hedge funds to plan clients.
Under the DOL settlement, Morgan Keegan was ordered to pay $633,715 to 10 pension plans victimized by the scheme.
Morgan Keegan was purchased this month by Raymond James Financial Inc. but won't be fully integrated until next year. Until then, it is operating as a subsidiary with its own platform, said Raymond James spokes- woman Anthea Penrose. The purchase agreement between Raymond James and MK's former parent, Regions Financial Corp., stipulated that Regions is to pay the settlement.
“This matter was fully reserved for prior to Raymond James' acquisition of Morgan Keegan,” Ms. Penrose said. “The terms of the DOL agreement are Morgan Keegan's responsibility, as they are the only party to the investigation and settlement.”
The alleged violations took place between April 2001 and November 2008.
The settlement requires that Morgan Keegan disclose to plan clients covered by the Employee Retirement Income Security Act of 1974 whether it is acting as a fiduciary. If so, it will have to break down the services it is providing and share with clients a description of compensation received from any source.
The investigation against Morgan Keegan was conducted by the Employee Benefits Security Administration's Consultant/Adviser Project, an initiative that concentrates on consultants' and advisers' pocketing of improper or undisclosed payments.
A report co-authored by Fred Reish, a partner at Drinker Biddle & Reath LLP, said that while the program had been around for several years, activity is heating up and that the DOL seemed to be emphasizing enforcement in light of upcoming rules that would force service providers to reveal their fees to plan clients and participants.
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