FINRA recently awarded $100,000 to baseball broadcaster Tim McCarver related to his losses on Morgan Keegan mutual funds. McCarver invested $400,000 in four closed-end mutual funds and one open-end fund. The funds suffered from the meltdown in subprime mortgage and other collateralized debt securities.
McCarver, who was seeking $1.6 million in compensation, legal and expert witness fees, deems the award a victory. His attorney, Dale Ledbetter, told me, “he won.” Investors who file arbitration claims with FINRA and are successful typically get 30 cents on the dollar, says Ledbetter, so McCarver did OK. The $1.6 million claim included potential returns had the sum in the Morgan Keegan mutual funds been reinvested from day 1. Morgan Keegan disputes Ledbetter's characterization of the case as a victory, however, noting that the panel actually awarded just 6 percent of the amount sought.
Morgan Keegan may face additional fines related to its mutual funds. Ledbetter says he has a “case a week” coming down the pike, involving these same funds. These cases involve other celebrities and VIPs, whom he declined to name. Ledbetter says the McCarver case was one of his weakest, which may augur well for his other clients.
"The most sophisticated of investors could not possibly have analyzed what was in these funds,” said Ledbetter in an earlier interview. “A person like Tim had no clue and relied–as he should have–on the people at Morgan and the brokers who he dealt with. And they, in turn, relied on their superiors, and they were simply misled,” he said.
From a legal perspective, McCarver won because the panel rendered a monetary award, says securities industry attorney Bill Singer. “Moreover, it is more likely that Ledbetter led with his weakest case in order to plumb the depths and learn of the respondents’ likely defense,” Singer said. “My professional guess is that subsequent cases will probably elicit larger awards.”