The U.S. Department of Labor (DOL) has ordered Morgan Keegan to pay $633,715 to 10 pension plans that were victimized by a scheme in which Morgan Keegan received kickback payments for recommending funds of hedge funds to plan clients, according to an (See InvestmentNews article entitled “Morgan Keegan ripped by DOL over kickbacks”). Morgan Keegan’s activities, which took place between April 2001 and November 2008, allegedly violated the Employee Retirement Income Security Act of 1974 (ERISA).
Morgan Keegan’s parent company, Regions Financial Corp., will be responsible for paying the settlement amount. Although Raymond James Financial Inc. purchased Morgan Keegan earlier this month, Morgan Keegan is reportedly operating as a subsidiary with its own platform and will not be fully integrated until next year.
Under the settlement with the DOL, Morgan Keegan also agreed to disclose to plan clients whether it is acting as an ERISA fiduciary, and, if so, to itemize the services it is providing and provide clients a description of any compensation will receive. The DOL’s investigation was conducted by the Employee Benefits Security Administration’s Consultant/Adviser Project, which reportedly is focusing on consultants’ and advisers’ receipt of improper or undisclosed payments.
DOL appears to be ramping up its investigation and enforcement activities in anticipation of new regulations that would require service providers to disclose their fees to plan clients and participants.
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