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What Boards Can Learn From the Morgan Keegan Case

On December 10, 2012, the Securities and Exchange Commission charged eight former members of the board of directors of the Morgan Keegan Funds with a number of violations under the Investment Company Act of 1940, as amended. These charges related to alleged failures by the board in connection with their valuation oversight responsibilities for five funds that invested heavily in subprime mortgage backed securities. The action against the board follows the settlement of a separate enforcement action, based on the same underlying facts, that the SEC brought against Morgan Asset Management, Inc., Morgan Keegan & Company, the portfolio manager of the Funds and the treasurer of the Funds. On March 27, 2013, the board agreed to settlement terms with the SEC that resulted in a dismissal of the action against them. As both of these actions are now concluded, it is appropriate to ask - What can boards of directors learn from these cases?

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