This agreement follows an investigation by the U.S. Department of Labor’s (DOL) Employee Benefits Security Administration (EBSA) that found the full-service brokerage company violated federal law when it recommended certain hedge funds of funds as investments to its ERISA-covered employee benefit plan clients. These recommendations resulted in the hedge funds of funds paying Morgan Keegan revenue-sharing and other fees.
Under the terms of the settlement, Morgan Keegan agreed to disclose to its ERISA plan clients whether the company will act as a fiduciary to those plans. If the company is acting as a fiduciary, it will specify the services it is providing. Morgan Keegan also will provide to these clients a description of all compensation and fees received, in any form, from any source, involving all related investments or transactions. The company either will not collect commissions or, if it does collect them, refund to its ERISA plans clients 100% of the amount collected from third parties.
“The law is very clear: If you accept a fee to give investment advice to a retirement plan, you are a fiduciary and must therefore act solely in the best interests of the participants in that plan,” said Phyllis C. Borzi, assistant secretary of labor for employee benefits security. “Third-party payments should never be the motivating factor behind which investments brokers and advisers steer retirement clients into.”
The alleged violations occurred between April 2001 and November 2008. Morgan Keegan is based in Memphis, Tennessee, and is owned by Regions Financial Corp. of Birmingham, Alabama.