SEC Charges Firms and Employees with Fraud Related to Subprime Mortgages

This story appeared in Bank Digest.

The SEC announced administrative proceedings against Memphis, Tenn.-based firms Morgan Keegan & Company and Morgan Asset Management and two employees accused of fraudulently overstating the value of securities backed by subprime mortgages. The SEC's Division of Enforcement alleges that Morgan Keegan failed to employ reasonable procedures to internally price the portfolio securities in five funds managed by Morgan Asset, and consequently did not calculate accurate “net asset values” (NAVs) for the funds. It further alleges that Morgan Keegan then recklessly published these inaccurate daily NAVs, and sold shares to investors based on the inflated prices.