Zarecor v. Morgan Keegan & Co.

The Zarecors invested $800,000 in the RMK Funds. Morgan Keegan was the lead underwriter for the Funds and was heavily involved in their operations. The Zarecors allege that Morgan Keegan omitted facts regarding policies and structure of the Funds; misrepresented the quality of the Funds to Zarecor; and “was intimately involved with” misrepresentations and omissions made in SEC filings, prospectuses, and other marketing materials. When the Funds collapsed in 2007, the Zarecors lost $718,577. Unrelated plaintiffs filed suit on behalf of a class that purchased mutual funds, including the RMK Funds, claiming that Morgan Keegan was liable as a “controlling person” under the Securities Exchange Act of 1934, 15 U.S.C. 78t(a), and violations of the Securities Act of 1933. 15 U.S.C. 77k. The Zarecors were part of the putative class, but opted out. The class action was resolved by settlement. In 2009, the Zarecors filed a statement of claim in arbitration with the Financial Industry Regulatory Authority (FINRA), alleging that Morgan Keegan had violated federal, New Jersey and Arkansas securities laws. The FINRA arbitration panel awarded them $541,000 in 2010, but a court vacated the award, holding that the dispute was not subject to arbitration under FINRA. The court dismissed their subsequent suit as untimely. The Eighth Circuit affirmed dismissal of claims under Arkansas law and federal law, but concluded that the claim under New Jersey law was timely. View "Zarecor v. Morgan Keegan & Co." on Justia Law