WASHINGTON (AP) - Eight former mutual fund directors have settled federal claims that they allowed others at the firm to set values for subprime mortgage securities that were held by funds on which investors lost about $1.5 billion.
The Securities and Exchange Commission announced the settlement Thursday with the former directors of five Regions Morgan Keegan funds. They aren't paying any penalty under the settlement. The SEC brought an enforcement action against the directors in December, saying they delegated the duty to fund managers, even though directors are required by law to set values when market prices aren't available.
The directors failed to make a diligent effort to learn how the values were determined, the SEC had alleged.
In June 2011, Morgan Keegan agreed to pay $200 million to settle the SEC's civil fraud charges of inflating the mortgage securities' value as the housing market was collapsing in 2007.
"Our settlement sends a clear warning of our commitment to enforce the duty of mutual fund directors and trustees to closely oversee the process of valuing securities held by their funds," George Canellos, a co-director of the SEC's enforcement division, said in a statement.
The directors neither admitted nor denied wrongdoing but agreed to refrain from future violations of the securities laws.
They are: J. Kenneth Alderman, Jack R. Blair, Albert C. Johnson, James Stillman R. McFadden, Allen B. Morgan Jr., W. Randall Pittman, Mary S. Stone and Archie W. Willis III.
Stone was a trustee of the Financial Accounting Foundation, which oversees the board that sets accounting standards. She resigned that position after the SEC brought the enforcement action against the directors in December. Stone, who also is a past president of the American Accounting Association, currently is an accounting professor at the University of Alabama.
Regions Financial Corp. last year completed the $930 million sale of Morgan Keegan, its investment management business, to Raymond James Financial Inc.