Regions Financial, Morgan Keegan & Company and its asset management subsidiary Morgan Asset Management have agreed to a settlement with the Securities and Exchange Commission, the Financial Industry Regulatory Authority and a group of state securities regulators.

The deal relates to the RMK funds, a business that Morgan Asset Management sold in 2008.

"This scheme had two architect - a portfolio manager responsible for lies to investors about the true value of the assets in his funds, and a head of fund accounting who turned a blind eye to the fund's bogus valuation process," said Robert Khuzami, director of the SEC's Division of Enforcement, in April 2010. "This misconduct masked from investors the true impact of the subprime mortgage meltdown on these funds," said William Hicks, associate director in the SEC's Atlanta office, also in April 2010.

As part of the settlement, Morgan Keegan and Morgan Asset Management agreed to pay $210 million, of which $200 million will be placed into two so-called Fair Funds for the benefit of investors in the RMK funds in any state.

The resolution of this matter gives Regions “greater flexibility”, according to president and chief executive Grayson Hall:  the firm has now retained Goldman Sachs to explore “potential strategic alternatives” for Morgan Keegan. Morgan Asset Management and Regions Morgan Keegan Trust are not included in this review.

The two Fair Funds, one administered under instructions from the SEC and another administered under instructions from the states involved, will each have $100 million paid in. A penalty of up to $10 million will be shared among those states that join in the settlement.

The five states initially included in the settlement are Alabama, Kentucky, Mississippi, South Carolina and Tennessee.

Regions Financial, with $132 billion in assets, is in the S&P 500 Index and has customers in 16 states across the South, Midwest and Texas. Morgan Keegan is the securities brokerage arm of Regions, headquartered in Memphis, Tennessee.