Regulators have announced a roughly $200 million settlement with Morgan Keegan & Co. Inc. in a fraud case several agencies brought against the firm last year.

Also announced Wednesday was a move by Morgan Keegan parent company, Regions Financial Corp., to explore future strategic options for Morgan Keegan that are rumored to include a sale.

Morgan Keegan and related company Morgan Asset Management will pay the $200 million into two funds, one to be administered by the U.S. Securities and Exchange Commission and the other administered under instructions from the states that participated in the civil fraud investigation into the Memphis-based investment firm.

That $200 million figure doesn’t take into account other investigation expenses and related items Morgan Keegan will pay.

Half the money, $100 million, will go into both of the funds to be set up, both of which are for the benefit of investors who collectively lost about $1.5 billion in seven proprietary mutual funds sold by Morgan Keegan broker dealers to more than 30,000 account holders.

The settlement is part of a years-long battle Morgan Keegan has fought over the matter that included litigation and arbitration claims from investors around the country. Some of those investors who lost money and later took action against the firm included prominent celebrities and athletes, schools, charities and nonprofits.

A simultaneous announcement from Regions on the same day details of the settlement were released signaled Morgan Keegan’s future is uncertain.

Regions said it has retained Goldman, Sachs & Co. to “explore potential strategic alternatives” for Morgan Keegan. Morgan Asset Management and Regions Morgan Keegan Trust are not a part of that review.

Regions president and CEO Grayson Hall released a statement calling Morgan Keegan a “very valuable franchise” but that “the resolution of this legacy regulatory matter gives Regions greater flexibility with respect to the Morgan Keegan franchise and the ability to explore opportunities that are consistent with our strategic and capital planning initiatives.”

Morgan Keegan CEO John Carson wrote a note to the firm’s clients that was distributed Wednesday, June 22, which said that after years of litigation it was time for the firm to put the matter behind it.

He stressed that Morgan Keegan, which was founded in Memphis 41 years ago, has more than $900 million in equity capital, no long-term debt and serves as an adviser on more than $82 billion in client assets.

“Financial markets have changed dramatically over the past several years, and every institution has had to re-examine its role and structure as this new world evolves,” Carson wrote. “As Regions and Morgan Keegan have navigated through that process, we’ve had to make some difficult decisions. One was the settlement of regulatory charges you may have read about recently.

“Looking forward, our parent corporation, Regions Financial, has retained Goldman Sachs to explore strategic alternatives for Morgan Keegan as Regions evaluates how best to deploy its capital to increase shareholder value as part of its capital planning process. Please know that this undertaking has our enthusiastic support and that my colleagues and I are fully engaged in this process.”

The Wall Street Journal, citing an unnamed source, reported Wednesday that Regions is putting Morgan Keegan up for sale in a bid to raise more capital, which will help Regions pay back its government aid as part of the Troubled Asset Relief Program.

The firm Stifel Nicolaus is rumored to be interested in buying Morgan Keegan, according to multiple sources.

Morgan Keegan’s settlement with regulators also includes a penalty of up to $10 million to be paid to states that join the settlement. The five states included are Alabama, Kentucky, Mississippi, South Carolina and Tennessee.

An administrator will identify investors in the funds who lost money, evaluate their claims and distribute funds. The funds that will be set up will be available to investors in any state, regardless of whether their state is one of the five participating in the settlement.

Also as part of the settlement, former portfolio manager James Kelsoe and comptroller Joseph Weller will pay fines. Kelsoe will pay $500,000 and is barred from the securities industry. Weller will pay $50,000.

Morgan Keegan and Morgan Asset Management are prohibited from creating, offering or selling any proprietary funds for two years. For the next three years, those firms also must provide special mandatory training to all registered agents and investment advisor representatives that includes training on the suitability and risks of investments.

Agencies with which Morgan Keegan settled included the SEC, the states and the Financial Industry Regulatory Authority.

As part of their investigation, state regulators conducted nine onsite branch examinations in seven states. They interviewed about 80 current and former Morgan Keegan sales representatives, managers and officers.

They also interviewed customers and studied thousands of e-mails, reports and other records.

Several investor depositions were taken. One investor in a 2010 deposition recalled a telephone conversation with a Morgan Keegan broker. When losses in the funds began to climb, the investor said the broker confidently insisted, “I own these funds, and I’m not selling.”

Another investor deposition taken last year described a similar encounter with a Morgan Keegan broker.

“I told him I was very disappointed about my Morgan Keegan account and didn’t want it to ‘bottom out’ and lose more money,” the deposition reads.

The broker’s reply was the funds were expected to recover. Besides, the broker pointed out, “You haven’t lost until you sell.”

Brad Bennett, executive vice president and chief of enforcement of FINRA, said Morgan Keegan did not fully disclose the investment risk in some of its products.

Duncan Williams, the president of Duncan-Williams Inc., said a sale of Morgan Keegan would be bad for Memphis.

“I’ve seen the news, and while I have said repeatedly that to have a company like Morgan Keegan be sold would be a horrible thing for the city of Memphis, luckily there’s firms such as ours who can provide people with employment in case they either don’t like the culture of the acquiring firm or if they don’t have a job,” Williams said. “Firms such as ours are always looking to hire good, qualified professional people.”