The Securities and Exchange Commission announced a settlement in an enforcement proceeding against eight former directors of five Regions Mortgage Keegan open- and closed-ended funds that were heavily invested in securities backed by subprime mortgages.

The proceedings alleged that the directors failed to satisfy their pricing responsibility under the federal securities laws.

"Under the securities laws, fund directors are responsible for determining the fair value of portfolio securities for which market quotations are not readily available," members of the SEC explained in a release.

They added, "In addition, fund directors must determine the methodologies to be used to fair value securities and must periodically reevaluate the appropriateness of those methodologies."

The settled order found that the eight directors failed to satisfy these responsibilities. 

Specifically, the directors delegated their fair valuation responsibility to a valuation committee without providing adequate substantive guidance on how fair valuation determinations should be made. 

"Our settlement sends a clear warning of our commitment to enforce the duty of mutual fund directors and trustees to closely oversee the process of valuing securities held by their funds," said George Canellos, Co-Director of the SEC's Division of Enforcement.