When a Financial Industry Regulatory Authority arbitration panel denied a $2.2 million claim brought by 22 investors against Morgan Keegan & Company's seven embattled funds in March, it was a surprise to the claimants' attorney, Paul J. Dobrowski.

That's because Dobrowski, a partner at Houston law firm Dobrowski LLP, won a $9.2 million arbitration award for another group of 43 investors against Morgan Keegan's funds in October. Some individuals were claimants in both cases. Now, after Morgan Keegan has been ordered to pay $200 million to investors to settle charges surrounding its funds, Dobrowski says that having had evidence of the regulators' findings before could have changed the outcome.

The $200 million settlement between Morgan Keegan and a host of regulators — FINRA, the Securities and Exchange Commission (SEC) and five states, including Alabama, Kentucky, Mississippi, South Carolina and Tennessee — was announced in June. Under the agreement, Morgan Keegan is set to pay $100 million to a state fund to be distributed to investors, $75 million to the SEC that will go into a Fair Fund to pay affected investors and $25 million in disgorgement and interest.

Morgan Keegan neither admitted nor denied the regulators' findings, which came after $1.5 billion in investor losses since 2007 through a set of affiliated bond funds tied to subprime mortgage-backed securities. When it marketed those funds, particularly the Regions Morgan Keegan Select Intermediate Bond Fund, the regulators allege, the firm didn't adequately present the investments' facts at the outset, nor did it disclose the impact market conditions had on those investments in 2007.

Regulators also alleged that Morgan Keegan didn't have accurate methods to calculate the funds' net asset values, and subsequently presented inflated disclosures of the funds' pricing. Former Morgan Keegan portfolio manager James C. Kelsoe, Jr. was found to have ordered price adjustments to the values of some of those portfolio securities that did not accurately reflect their market value, according to the SEC. The SEC ordered Kelsoe to pay $500,000 in penalties and barred him from the industry.

The settlement can be admitted for evidence at the discretion of each FINRA arbitration panel, meaning that some panels may take it into consideration and others will not. For Dobrowski, having that evidence could have changed the outcome of the $2.2 million claim that was lost, he says, because a competent panel would have admitted that evidence. He could have used it to cross-examine Kelsoe, who testified in that particular case.

Morgan Keegan has aggressively fought these funds-related arbitration cases and will continue to do so. In the $9.2 million award granted by the FINRA arbitration panel in Dobrowski's case in October, Morgan Keegan's subsequent appeal of that decision is pending.

In many of the arbitrations already brought against Morgan Keegan, the firm has "established a solid track record" with a large majority of the cases filed against the firm having already been resolved, according to Morgan Keegan spokeswoman Kathy Ridley. As of July 8, some 302 cases with damages totaling $169 million have been tried or abandoned. Of those tried, about half have resulted in no awards for claimants, Ridley says.

Out of the cases that claimants have won and are not being appealed, claimants have received about $14 million, which amounts to less than $.30 per dollar of the claimed losses, Ridley says. In addition, claimants have also abandoned 166 cases, which sought more than $66 million in damages. Ridley says she cannot disclose how many cases have been resolved through settlements.

With the announcement of the regulatory settlement, Regions Financial Corp., which owns Morgan Keegan, says it plans to explore strategic alternatives for the business including a possible sale.

Meanwhile, investors in the Morgan Keegan funds will continue to seek reimbursement, lawyers say. "We are starting to get a whole new rash of cases," says Dale Ledbetter, partner at the Ft. Lauderdale, Fla. law firm Ledbetter and Associates, which worked on more than 150 Morgan Keegan cases.

The SEC may not announce procedures for the settlement funds distribution until Sept. 6, says Chicago-based attorney Howard B. Prossnitz, who has worked on about 40 Morgan Keegan cases. After that, it will likely be months before claims can be filed and money is distributed, he estimates. It's also still not clear if investors who did not buy their investments directly through Morgan Keegan will be eligible for reimbursement. "My recommendation would be to pursue both avenues," using arbitration and the settlement fund route, Prossnitz says. "A lot of the arbitration awards won't get 100% of their recovery. They're not going to get 100% of their recovery in the fair fund." Ows