A dissenting vote by one of the arbitrators opens the door to an appeal, however slight the chances may be.

[ by Howard Haykin ]

Morgan Keegan has been inundated by more than 1,000 arbitration cases of the past several years - all involving the RMK bond funds.  The firm sold over $2 billion of the funds throughout 2006 and 2007.  The funds were invested heavily in risky structured products - including subprime products - and all soured during the great credit crisis that began in 2007. 

In April 2010, FINRA filed a complaint against Morgan Keegan, charging the firm with using false and misleading sales materials that failed to adequately inform customers about the risks associated with the funds.  Morgan Keegan settled the FINRA charges by agreeing to pay $200 million in 2011.

Some of the cases against Morgan Keegan are still wending their way through FINRA's arbitration forum.  The outcomes of closed cases have varied widely, with investors winning some and losing others.  Some of the awards to winning customers have been quite large, comprising repayment of damages, pre-judgment interest and penalties. 

In 2012, Raymond James acquired the brokerage firm from Regions Financial Corp.Last year, in part under the burden of these legal actions, the firm sold itself to Raymond James.  Raymond James recently announced plans to retire the Morgan Keegan name sometime this month.

Morgan Keegan Wins $9.6 Million Arb Case, But ...    FINRA reported Monday that Morgan Keegan successfully defended itself against a Memphis-based nonprofit group that claimed the firm misrepresented a money-losing bond fund and sought $9.6 million in damages.  The Urban Child Institute, an organization that promotes wellness programs for young children, filed a complaint in 2009 against Morgan Keegan, charging the firm with civil fraud, misrepresentation and the sale of unsuitable investments, among other things. 

However, the decision by the 3-member arbitration panel - while in favor of respondent Morgan Keegan - was not unanimous.  One arbitrator signed a dissent objecting to the ruling.  The arbitrators, however, did not provide reasons for their decision, or for the dissent, as is typical of most FINRA arbitration rulings.

Possibility of an Appeal.   The dissenting vote provides a glimmer of hope for the claimant, should they seek to take the case to the courts.  While the non-unanimous decision may leave the door ajar for the claimant to take the case to court in an effort to vacate the arbitration ruling, such moves admittedly are unusual, and they rarely succeed.

But, $9.6 million is a lot of money, and just 4 months ago, a U.S. Court of Appeals reinstated a decision against Morgan Keegan.  In that case, the arbitration panel ruled in favor of the complainants - the customers - but Morgan Keegan took the case to federal district court where the decision was overturned.  However, the U.S. Court of Appeals reinstated the arbitration panel's ruling.  So, decisions can turn once and even turn twice.

A representative for the Urban Child Institute, which sought more than $9.6 million in the case, could not be immediately reached for comment. The group's lawyer did not immediately return a phone call requesting comment.

For further details, go to:   [Reuters, 2/4/13].