Regions Financial Corp. (RF) will have to shell out $1 million as penalty to settle Securities and Exchange Commission (SEC) charges. The SEC had filed a civil action against Regions Bank for its role in connection with a Florida-based offering scam by unregistered broker-dealers U.S. Pension Trust Corp. and U.S. College Trust Corp. (collectively, USPT).
Regions Bank, and its predecessor Union Planters Bank, acted as trustees for a pair of unregistered investment brokers, the USTP. The trust arrangement was begun in 2001 by Union Planters, which merged with Regions in 2004. Regions allowed its name to be used in marketing materials, helped prepare a promotional video and met with prospective investors and some of the schemes’ 2,000 unregistered sales agents.
Without telling investors, the two investment plans deducted 18-85% of contributions to pay large sales commissions and enhance the plans’ own profits. Approximately $255 million was raised illicitly from about 14,000 investors. The $1 million penalty will be put into a fund to compensate investors in the fraud.
Regions ceased accepting new clients from the investment plans in January 2008 and closed processing contributions and renewals for existing plans last month. The accounts currently hold about $95 million in mutual fund assets for 11,000 investors, according to the SEC. Recent news coverage has not been pleasant for Regions Financial.
In its second quarter, the company posted $244 million in net losses versus $206 million in profits during the same period in 2008. Adding to the bank’s woes is news from the SEC that the regulator issued a Well notice to Regions subsidiary Morgan Keegan in July as well as three employees, informing them to get ready for future enforcement action over violations of federal securities laws.
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