The accord resolves a civil action filed by the Securities and Exchange Commission last year accusing the Memphis-based firm of inflating the value of mortgage-backed securities in its mortgage bond funds during 2007.
State regulators from Alabama, Kentucky, Mississippi, South Carolina and Tennessee were also involved in the settlement.
As part of the settlement, the $200m will be divided among some 39,000 investors who lost $1.5bn in 2007 and 2008.
In the Morgan Keegan settlement, the SEC said it will prohibit the company from making proprietary mutual funds, the kind sold to investors in this case, for two years.
Yesterday, JPMorgan Chase too agreed to pay $153.6m to settle charges it had misled investors about the risk of mortgage-backed securities. Last year, Goldman Sachs agreed to pay $550m to settle charges of securities fraud.
Regions Financial Corp, Morgan Keegan’s parent company, responded by hiring investment bank Goldman Sachs & Co to explore strategic alternatives.
A full or partial sale of Morgan Keegan is among the possibilities, according to media reports.
