Perhaps portending a trend in stock drop cases, Regions Financial agreed to pay $22.5 million to settle a lawsuit by their employees over company stock and bond funds offered by a subsidiary. Employees alleged that company stock, which fell precipitously, was too risky to be offered in the company’s 401(k) plan, as were bond funds offered by a former subsidiary, Morgan Keegan.
Regions had previously settled claims by regulators, including the SEC, over these same funds. The regional bank covering 16 states has $117 billion in assets. It has dabbled in the 401(k) record keeping business, and exited the broker dealer arena with the sale of Morgan Keegan to Raymond James.
Earlier this month the U.S. Supreme Court agreed to hear a stock drop case to settle a judicial split over whether plan sponsors should have a presumption of prudence regarding company stock. If that presumption is overturned, many experts are predicting more class action stock drop cases.
