Regions Unit Draws SEC Scrutiny on Funds

Regions Financial (RF Quote) faces potential enforcement actions from the Securities and Exchange Commission over possible violations of federal securities laws in its asset management unit.

The SEC's Atlanta regional office on July 9 issued Morgan Keegan Asset Management a so-called Wells notice, according to a regulatory filing by the Birmingham, Ala.-based company on Wednesday. Morgan Keegan, based in Memphis, is the investment banking, securities brokerage, trust and asset management businesses of Regions. The filing said that three Morgan Keegan employees also received Wells notices from the SEC.

The Wells notice stated that the SEC "intends to recommend that the commission bring enforcement actions for possible violations of the federal securities laws" related to an ongoing investigation of certain mutual funds formerly managed by the unit, according to the filing.

A Wells notice is neither a formal allegation nor a finding of wrongdoing. The company will have an opportunity to present its perspective on these issues before any formal decision is made on an enforcement proceeding.

Regulators have been investigating various fund managers for their roles in the credit crisis. Last month, State Street (STT Quote) disclosed that it received a Wells notice related to certain fixed income strategies that were ultimately backed by subprime mortgages that took massive losses.

"Given the ongoing market conditions affecting securities like these, this is obviously a point of interest for the SEC," Regions spokesman Tim Deighton told TheStreet.com. "While we are vigorously defending our position and practices, we have cooperated fully with the SEC and are working to resolve this promptly."