Morgan Keegan & Co. has agreed to a $200 million settlement with the Financial Industry Regulatory Authority (FINRA) and five state securities regulators that resolves a civil case brought against the firm last year accusing top executives of defrauding investors by artificially inflating the value of mortgage-backed securities in several of its mortgage bond funds.

Under the terms of the agreement, Morgan Keegan, which neither admits or denies wrongdoing as a condition of the settlement, will be required to repay at least some of the estimated $1.5 billion in losses suffered by investors in seven affiliated bond funds that it marketed between January 2006 and September 2007.

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