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Business Litigation as SEC appeals dismissal

In recent business litigation action, the SEC (Securities and Exchange Commission) has sought to appeal the decision of the U.S. District Court, Northern District of Georgia (Atlanta). The appeal is based on the court's decision to dismiss the securities fraud suit brought against Morgan Keegan and Co. The SEC alleges the Regions Financial Corporation unit willfully misled its investors who lost billions of dollars since the market collapse of 2008.

As part of its legal action, the SEC has asked that the lower court send a transcript of its proceedings to the Atlanta-based U. S. Court of Appeals. The appeal notice was filed August 26. Regions Financial has declined to comment.

On June 28 of this year, Judge William Duffey ruled in favor of Morgan Keegan and Company. Duffey threw out the SEC's claims that Morgan Keegan had not provided accurate disclosures concerning the failing of auction-rate securities. Georgia based Judge Duffey wrote that "failure to predict the market does not constitute securities fraud."

It has been estimated that the auction-rate securities market was worth approximately $330 billion before the market collapsed. Some investors have been able to recoup losses through commercial litigation with dozens of banks. These investments were generally student-loan bonds, municipal bonds, and preferred shares of stock.

Market troubles came to a head in February 2008, as participation by dealers came to a halt when they learned their investments could not be redeemed as promised. They also assert that these investments were not as "good as cash" as they had been told they would be. Many investors found it impossible to cash in their investments when interest rates reset.

Source: The Business Week, "SEC Appeals Dismissal of Morgan Keegan Securities-Fraud Suit," Laurence Viele Davidson, Sept. 8, 2011

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