Opinion ID: 799254
Heading Depth: 2
Heading Rank: 8

Heading: Morgan Keegan's Alleged Oral Misrepresentations

Text: During the early 2008 auction failures in the ARS market, Morgan Keegan continued to sell ARS. Between January 2 and March 19, 2008, [6] Morgan Keegan sold approximately $647 million of ARS to about 1,145 customers. This is the time frame at issue in this SEC enforcement action. The SEC contends that, in late 2007 continuing through the collapse of the ARS market in February 2008, Morgan Keegan's brokers misrepresented ARS liquidity risk in an attempt to increase sales. The SEC cites the testimony of four customers who stated that Morgan Keegan brokers misled them regarding the risk associated with ARS. These four Morgan Keegan customers testified that Morgan Keegan brokers told them that ARS (1) were as good as cash; (2) were as good as money; (3) were just like money markets and CDs; (4) were cash equivalents to CDs and money markets; (5) were just as good as an investment in a CD insured by the FDIC; (6) were completely liquid except for a possible 35-day hold; (7) presented zero concerns [and] zero risk; and (8) involved absolutely no risk. The customers averred that the brokers did not disclose the possibility of an auction failure and the associated liquidity risk. They testified further that some Morgan Keegan brokers claimed that ARS investments carried no risk at all. The SEC contends that these four customers never saw the ARS web page, the ARS Manual, or the ARS Brochure, and that their brokers never told them where these documents could be found. The SEC also submitted written complaints from 14 customers, including customer letters, civil actions filed in federal court, arbitration statements of claim filed with the Financial Industry Regulatory Authority, complaints filed with state regulators, and complaints filed with the SEC. These written complaints identified similar misrepresentations of the liquidity risk of ARS by Morgan Keegan brokers.