The auction rate securities hangover has not gone away, yet. A federal appeals court on Wednesday ruled that Morgan Keegan fraudulently mislead investors when it sold them auction rate securities, overturning a ruling from last June in which an Atlanta judge found that Morgan Keegan advisors had adequately disclosed the risks.
The 11th U.S. Circuit Court of Appeals in Montgomery, Alabama, said that, in fact, the alleged misrepresentations made by Morgan Keegan brokers about ARS were material and sent the case back to the district court.
Morgan Keegan was acquired by Raymond James Financial in April from Regional Financial for $1.2 billion. The SEC first filed a lawsuit against Morgan Keegan for misleading investors about the liquidity risks of auction rate securities back in July 2009.
We wrote about the auction rate securities mess way back when the market froze up in February 2008.