The Securities and Exchange Commission said Tuesday that it is seeking a court order to require a Regions Financial Corp. unit to repurchase illiquid auction-rate securities.

The SEC alleged in a filing with the U.S. District Court for the Northern District of Georgia that Morgan Keegan & Co. failed to warn clients about the potential illiquidity of the securities, selling about $925 million of the securities from November 2007 to March 20, 2008. The agency said that clients were unable to liquidate about $1.2 billion of securities.

Robert Khuzami, director of the SEC's division of enforcement, said in a press release that, "Morgan Keegan was clearly aware that the ARS market was deteriorating, but it went so far as to actually accelerate its ARS sales even after other firms' ARS auctions began to fail."

An e-mail to Regions wasn't immediately returned and company executives did not mention the legal action during a call to discuss second-quarter results. Regions first mentioned the potential for legal action in its annual report filed in April.

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