Morgan Asset Management, Inc.; Morgan Keegan & Company, Inc.;James C. Kelsoe, Jr.; and Joseph Thompson Weller, CPA
UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
Securities Exchange Act of 1934
Release No. 69288 / April 3, 2013
Administrative Proceeding File No. 3-13847
In the Matter of Morgan Asset Management, Inc.; Morgan Keegan & Company, Inc.; James C. Kelsoe, Jr.; and Joseph Thompson Weller, CPA Respondents. |
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Notice of Proposed Plan of Distribution and Opportunity for Comment |
Notice is hereby given, pursuant to Rule 1103 of the United States Securities and Exchange Commission's (the "Commission") Rules on Fair Fund and Disgorgement Plans, 17 C.F.R. § 201.1103, that the Division of Enforcement has submitted to the Commission a proposed plan for the distribution of monies placed into a Fair Fund in the above-captioned matter.
On June 22, 2011, the Commission issued a Corrected Order Making Findings and Imposing Remedial Sanctions and a Cease-and-Desist Order Pursuant to Section 15(b) of the Securities Exchange Act of 1934, Sections 203(e), 203(f) and 203(k) of the Investment Advisers Act of 1940, and Sections 9(b) and 9(f) of the Investment Company Act of 1940, and Imposing Suspension Pursuant to Section 4C of the Securities Exchange Act of 1934 and Rule 102(e)(1)(iii) of the Commission Rules of Practice ("Order"). Exchange Act Rel. No. 64720 (June 22, 2011). The Order stated that Morgan Asset Management, Inc. and Morgan Keegan & Company, Inc. (collectively "Morgan") failed to employ reasonable pricing procedures for subprime mortgage-backed securities and consequently did not calculate accurate net asset values for certain funds offered by Morgan containing those subprime mortgage-backed securities ("Funds"). The Order also stated that James C. Kelsoe, Jr. and Joseph Thompson Weller, CPA caused Morgan's false valuations of the subprime mortgage-backed securities comprising the Funds' portfolios. The Order created a Fair Fund pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, as amended. Morgan, Kelsoe, and Weller (collectively "Respondents") simultaneously submitted an Offer of Settlement, agreeing to pay a total of $100,300,000 in disgorgement, prejudgment interest, and civil money penalties.
OPPORTUNITY FOR COMMENT
Pursuant to this Notice, all interested parties are advised that they may print a copy of the Proposed Plan of Distribution from the Commission's public website: http://www.sec.gov. Interested parties also may obtain a written copy of the Proposed Plan of Distribution by submitting a written request to: Anik A. Shah, United States Securities and Exchange Commission, 100 F Street, N.E., Washington, DC 20549-5631. All persons who desire to comment on the Proposed Plan of Distribution may submit their comments, in writing, no later than thirty (30) days from the date of this Notice:
- By sending a letter to the Office of the Secretary, United States Securities and Exchange Commission, 100 F Street, N.E., Washington, DC 20549-1090;
- By using the Commission's (http://www.sec.gov/litigation/admin.shtml); or
- By sending an e-mail to rule-comments@sec.gov.
Comments submitted by e-mail or via the Commission's website should include "Administrative Proceeding File No. 3-13847" in the subject line. Comments received will be publicly available. Thus, persons should only submit information that they wish to make publicly available.
PROPOSED PLAN OF DISTRIBUTION
The Fair Fund is comprised of $100,300,000 in disgorgement, prejudgment interest, and civil money penalties paid by Respondents, plus any accumulated interest and less any federal, state, or local taxes and fees relating to the investment of the Fair Fund. The Proposed Plan of Distribution provides for the distribution of the Fair Fund to investors: (i) harmed by losses resulting from the fraudulent mispricing of the Funds' net asset values during the relevant period including: a) proximately caused losses to those harmed investors who purchased shares at inflated prices and did not sell the shares purchased at similarly inflated prices, and b) losses to those harmed investors who purchased shares prior to the relevant period but who, if proper disclosure had been made and had the Funds' shares been properly valued during the relevant period, potentially would have sold their shares no later than the end of the relevant period; and (ii) who potentially incurred market-related losses resulting from the financial crisis during the relevant period.
The loss calculation for the Proposed Plan of Distribution allows for the Fair Fund to calculate investor losses by taking the dollar value of shareholdings as of January 1, 2007 (without regard to the cost basis for those shares), plus the dollar value of all purchases/acquisitions during the relevant period, less the dollar value of all cash interest or dividends received during the relevant period, less the dollar value of all sales during the relevant period, and less the dollar value of shares owned on August 10, 2007.
The Proposed Plan of Distribution requires harmed investors to submit claims in writing or electronically with documentary evidence, including, but not limited to, evidence of holdings, purchases, and/or sale of any of the Funds' shares during the relevant period within 120 days from the date of the initial mailing, the first publication of the online notice, or a re-mailing by the fund administrator as provided in the Proposed Plan of Distribution.
By the Commission.
Elizabeth M. Murphy
Secretary
See also
Proposed Plan of Distribution