Regions Financial ( RF) 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) 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."
Morgan Keegan received a separate Wells notice this spring regarding auction rate securities as part of an industry wide investigation following the collapse of the market for those securities, Regions disclosed in a May filing with the SEC. The investigation related to adequacy of disclosure to investors of the liquidity risks associated with auction-rate securities and whether the firm sold a significant volume of the securities after its ability to support auctions was diminished, the filing said. Last year, large banks including JPMorgan Chase ( JPM), Morgan Stanley ( MS) , Citigroup ( C), Wachovia (now owned by Wells Fargo ( WFC)) and Merrill Lynch (now owned by Bank of America ( BAC)) agreed to repurchase auction-rate securities from investors as part of industry wide settlements with federal and state regulators regarding securities abuses by the firms. Regions is set to report second-quarter earnings on July 21. Shares were 3.4% to $4.23 in recent trading.