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SEC and Former Morgan Keegan Directors Reach Tentative Settlement in Fair Valuation Case

The SEC has reached a tentative settlement agreement with former Morgan Keegan directors relating to charges that they failed to adequately oversee the fair valuation of securities in five Morgan Keegan Funds. The SEC alleged that the directors violated their fair value responsibilities with respect to securities backed by subprime mortgages that plunged in value during the mortgage crisis in 2007. According to the SEC complaint filed in December 2010, the directors failed to specify a fair valuation methodology and failed to continuously review the appropriateness of the methodology used by the valuation committee or to learn how fair values were actually being determined. Instead, the complaint alleges that the directors delegated fair valuation responsibility to a valuation committee without providing any meaningful substantive guidance on how those determinations should be made. For additional discussion of the charges against the former Morgan Keegan directors, see "SEC Charges Mutual Fund Directors for Failure to Oversee Asset Valuation" in our January 2013 update. Terms of the settlement were not disclosed and will now be presented to the SEC for consideration.

Sources: Dave Michaels and Zeke Faux, Ex-Morgan Keegan Fund Directors to Settle SEC Claims, Bloomberg, March 27, 2013; Joe Morris, SEC, Morgan Keegan Directors Reach Settlement, Ignites, March 28, 2013; In the Matter of J. Kenneth Alderman, et. al., SEC Administrative Proceeding File No. 3-15127, December 10, 2012.

Copyright © 2020 Godfrey & Kahn S.C.National Law Review, Volume III, Number 104

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