It's been a tough few weeks for Morgan Keegan.

The Memphis brokerage unit of Regions Financial recently lost big in two arbitration cases and failed to get a court order blocking discovery in a state court case brought by the retirement system for Louisiana's firefighters, which allegedly lost nearly $50 million by investing in Morgan Keegan bond funds.

In one arbitration case, a Financial Industry Regulatory Authority panel awarded $2.5 million to one investor, Andrew M. Stein. The panel found Morgan Keegan liable for unsuitability, negligence and failure to supervise.

In another defeat a few days later, an 89-year-old, highly decorated World War II veteran won an arbitration award of $1.1 million.

The Finra panel found that Morgan Keegan misrepresented and failed to disclose the true nature of the RMK funds to companies owned by Gen. Henry Cobb Jr. At issue were the RMK Select High Income Fund; RMK High Income Fund; RMK Strategic Income Funds; RMK Advantage Income Fund; and RMK Multi-Sector High Income Fund.

In his initial complaint, Cobb said the firm took his "hard-earned, conservative, low-risk money and went 'where no man has gone before.' They went to a place of untested, unstable, illiquid and unjustifiable risk, and deposited [Cobb's companies'] money into the black hole of subprime debt and its progeny."

Cobb's lawyer, Jeffrey Erez said his firm, Sonn & Erez, has filed a motion to confirm the award in federal court.

Morgan Keegan is facing legal challenges in state and federal court as well as remaining arbitration claims before Finra; other arbitrations that Morgan Keegan has lost include to such high-profile personalities as former professional basketball player Horace Grant, who was awarded $1.4 million, and former professional baseball player and sportscaster Tim McCarver, who was awarded $100,000.

Last year parent company Regions said it received a Wells notice from the Securities and Exchange Commission, saying it was looking into the funds and might bring a civil action against Morgan Keegan.

For its part, Morgan Keegan is not rolling over.

"As of March 1, 2010, 81 cases have been heard by arbitration panels with 39 resulting in an outright dismissal of the claims. Overall in the 81 cases tried, claimants have sought approximately $49 million in compensatory damages and have received more than $10.3 million in awards. Additionally, 118 cases seeking more then $25 million in damages have been abandoned by claimants," the firm said in an e-mail.

A Finra spokesman said he could not comment on the number of arbitration cases concerning the RMK funds; nor could he comment on the disposition of those disputes.

The management of seven RMK Select fixed-income funds were transferred to Hyperion Brookfield Asset Management in July 2008, Morgan Keegan said.

The three open-end funds were closed and the four closed-end funds have been renamed.

The former portfolio manager of the bond funds is employed by Morgan Keegan but no longer manages any funds, the firm said.

"At this point, there has been no further action from the SEC with regard to the Wells notice," Morgan Keegan said.

"The regulators are moving at a snail's pace," Erez said. "I'm not waiting for them."

Nor are many other claimants. But in many cases, investors only want to hold Morgan Keegan liable and not the financial advisers.

However, the advisers are still being called to testify about how safe they thought the funds were and what they told their clients.

"We believe the brokers were deceived along with the clients," Erez said. "When you scratch below the surface, [the advisers] were buying it for themselves and their families."

The broker in the Cobb case even invested in some of the funds for his own mother, Erez said.

Still, the arbitration awards against Morgan Keegan should make advisers more careful about the advice they give, he said.

"I think this case puts them on notice," Erez said.

"You need to do your own due diligence. You better know the products. And, if you're not satisfied, then don't sell the product."

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