Regions Bank 2009 Annual Report Download - page 194

predict the ultimate resolution or financial liability with respect to these contingencies, management is currently
of the opinion that the outcome of these proceedings would not have a material effect on Regions’ consolidated
financial position or results of operations.
In July 2009, Morgan Keegan & Company, Inc. (“Morgan Keegan”), a wholly-owned subsidiary of
Regions, Morgan Asset Management, Inc. and three employees each received a Wells notice from the Staff of the
Atlanta Regional Office of the Securities and Exchange Commission (“SEC”) stating that the Staff intends to
recommend that the Commission bring enforcement actions for possible violations of the federal securities laws.
The potential actions relate to the Staff’s investigation of the Funds. Additionally, in July 2009, Morgan Keegan
received a Wells notice from the enforcement staff of the Financial Industry Regulatory Authority (“FINRA”)
advising Morgan Keegan that it had made a preliminary determination to recommend disciplinary action against
Morgan Keegan for violation of various NASD rules relating to sales of the Funds during 2006 and 2007. A
Wells notice is neither a formal allegation nor a finding of wrongdoing. The notices provide the recipients the
opportunity to provide their perspective and to address issues raised prior to any formal action being taken by the
SEC or FINRA. Responses have been submitted to both the SEC and FINRA notices. Also, a joint state task
force has indicated that it is considering charges against Morgan Keegan, related entities and certain of their
officers in connection with sales of the Funds. Discussions are ongoing with the state securities commissioners in
the task force about the proposed charges and possible resolutions. Although it is not possible to predict the
ultimate resolution or financial liability with respect to these matters, management is currently of the opinion that
the outcome of these matters will not have a material effect on Regions’ business, consolidated financial position
or results of operations.
In March 2009, Morgan Keegan received a Wells notice from the SEC’s Atlanta Regional Office related to
auction rate securities (“ARS”) indicating that the SEC staff intended to recommend that the Commission take
civil action against Morgan Keegan. On July 21, 2009, the SEC filed a complaint in United States District Court
for the Northern District of Georgia against Morgan Keegan alleging violations of the federal securities laws in
connection with ARS that Morgan Keegan underwrote, marketed and sold. The SEC is seeking an injunction
against Morgan Keegan for violations of the antifraud provisions of the federal securities laws, as well as
disgorgement, financial penalties and other equitable relief for customers, including repurchase by Morgan
Keegan of all ARS that it sold prior to March 20, 2008. Beginning in February 2009, Morgan Keegan
commenced a voluntary program to repurchase ARS that it underwrote and sold to the firm’s customers, and
extended that repurchase program on October 1, 2009 to include certain ARS that were sold by Morgan Keegan
to its customers but were underwritten by other firms. As of December 31, 2009, customers of Morgan Keegan
owned approximately $247 million of ARS and Morgan Keegan held approximately $166 million of ARS on its
balance sheet. On July 21, 2009, the Alabama Securities Commission issued a “Show Cause” order to Morgan
Keegan arising out of the ARS matter that is the subject of the SEC complaint described above. The order
requires Morgan Keegan to show cause why its registration as a broker-dealer should not be suspended or
revoked in the State of Alabama and also why it should not be subject to disgorgement, repurchasing all ARS
sold to Alabama residents and payment of costs and penalties. Although it is not possible to predict the ultimate
resolution or financial liability with respect to the ARS matter, management is currently of the opinion that the
outcome of this matter will not have a material effect on Regions’ business, consolidated financial position or
results of operations.
In April 2009, Regions, Regions Financing Trust III (the “Trust”) and certain of Regions’ current and
former directors, were named in a purported class-action lawsuit filed in the U.S. District Court for the Southern
District of New York on behalf of the purchasers of trust preferred securities offered by the Trust. The complaint
alleges that defendants made statements in Regions’ registration statement, prospectus and year-end filings which
were materially false and misleading. No class has been certified, and at this stage of the lawsuit Regions cannot
determine the probability of a material adverse result or reasonably estimate a range of potential exposures, if
any. However, it is possible that an adverse resolution of these matters may be material to Regions’ business,
consolidated financial position or results of operations.
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