Months before its Morgan Keegan mutual funds were beleaguered by an investigation by the SEC, a slew of arbitration claims and large losses, Regions Financial Corp. already saw that the funds were going to be a major financial and public relations disaster and decided it had to go.
Prompted by bad nationwide press on the risky nature of the funds, a regulatory filing last week revealed that, in late 2007, directors of Morgan Keegan already began negotiating with Hyperion Brookfield Asset Management over how to transfer management of the funds and what would occur after a handoff.
An agreement was reached between the two parties in April. Morgan Keegan management would step down and hand over management of the funds to Hyperion. However, it turns out that outcome was expected months ago before all the bad press and lawsuits.
Lawyers involved in the lawsuits are still trying to assess the significance this management change has on their cases.Since June of last year, six of the seven Morgan Keegan funds have lost more than 75 percent of their value. According to a Morningstar analyst, it's rare for an asset management firm to give up assets this way because even with large losses, the fund is still making an expense ratio on it. So, the lawsuits might have played a big part in prompting Regions to get the funds off their hands quickly.
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