The Securities and Exchange Commission today announced charges against eight former members of the boards of directors overseeing five Memphis, Tenn. based mutual funds for violating their asset pricing responsibilities under the federal securities laws.
The eight fund directors named in today’s SEC enforcement action are:
- J. Kenneth Alderman of Birmingham, Ala.
- Jack R. Blair of Germantown, Tenn.
- Albert C. Johnson of Hoover, Ala.
- James Stillman R. McFadden of Germantown
- Allen B. Morgan Jr. of Memphis
- W. Randall Pittman of Birmingham
- Mary S. Stone of Birmingham
- Archie W. Willis III of Memphis
According to the SEC’s order, the eight directors’ failure to fulfill their fair value-related obligations was particularly inexcusable given that fair-valued securities made up the majority of the funds’ net asset values – in most cases more than 60 percent. The mutual funds involved were the RMK High Income Fund, RMK Multi-Sector High Income Fund, RMK Strategic Income Fund, RMK Advantage Income Fund, and Morgan Keegan Select Fund.
The SEC Enforcement Division alleges that the directors caused the funds to violate the federal securities laws by failing to adopt and implement meaningful fair valuation methodologies and procedures and failing to maintain internal control over financial reporting. For example, the funds’ valuation procedures did not include any mechanism for identifying and reviewing fair-valued securities whose prices remained unchanged for weeks, months, and even entire quarters.
The full SEC order may be found here: http://www.sec.gov/litigation/admin/2012/ic-30300.pdf