Morgan Keegan & Co, a subset of Regions, a wealth management and investment company, was targeted by the SEC in a Wells notice, a warning of legal charges, earlier this month. Charges are going to be brought upon brokerage and wealth management units, and three company employees.

The meltdown is centered in several mutual funds that were managed by senior portfolio manager, James Kelsoe. The funds in question lost over half their value through 2007-8, due in part to the crisis that struck the financial sector. In fact, by mid 2008, Kelsoe’s mutual funds values dropped an average of 59.5%. This is drastic, since US mutual funds rose an average of 9.9% in value. The 60% difference in proceeds puts Morgan Keegan to shame.

The SEC is not the only one turning its head. Investors who trusted Kelsoe with a distribution of their funds to mutual funds are filing lawsuits against Morgan Keenan. Although it has been speculated that Regions is considering selling Morgan Keegan, representatives hint that it may not be so. Morgan Keenan is one of the firm’s most valuable assets. However, it is important to note the rapid downfall of the company, for the July SEC notice is not the first it has received this calendar year.

This controversy may cause investors and wealth management professions to doubt the success of mutual funds, especially in such a market. In fact, the mutual fund sector looked gloomy in the past, especially when set against a background of the financial crisis and fiscal failure. However, a wealth management specialist who is experienced (and lucky, too) will be able to diversify the mutual fund portfolio.

In essence, mutual funds are a managed group of assets, diversified over several securities from a pool of money from investors. While this may guarantee diversification of a portfolio, wealth management professionals are driven towards higher return, and thus, higher risk securities. However, it seems that lately, mutual funds are winners in the wealth management sectors.

But this cannot all be attributed to the wealth management professionals. In fact, the current rise of mutual funds cannot be attributed to investors suddenly becoming more creative. Most of the portfolio rises are seen in ones which invest in technology giants, which are on the rise themselves. It is a matter of ability to read that market, intuition, and a touch of luck.

While money-market assets fall and the financial sector is taking a loss, it seems that wealth management professionals have adapted to the current market and have rescued mutual funds, even bringing them into the profit range. Mutual funds have generated a lot of buzz in the industry, with reporters marveling at the proceeds. Although investors in the wealth management sector should continue to monitor the securities and invest wisely, it seems that mutual funds are going to keep their head over water, at least for now.