Regions, one of the Southeast's largest regional banks that has been plagued by financial woes after the recession, has hired Goldman Sachs & Co. to sell or explore alternatives for its Morgan Keegan financial services firm.The announcement comes on the heels of the company announcing it has agreed to pay $210 million to settle regulatory probes against Morgan Keegan for fraudulently misleading investors about the risk of mutual funds containing risky sub-prime mortgages.

The bank (NYSE: RF) purchased Morgan Keegan, a Tennessee-based brokerage firm, in 2001 as banks moved to integrate such services into traditional operations for expanded revenue. With more than 3,500 employees, Morgan Keegan was at one time one of the South's premier brokerage firms, but like many such unions the marriage has been prickly for both in recent years. The probe into the mutual fund supbrime practices did not help the situation.

Long a stronghold in the Deep South, Morgan Keegan was under investigation from state regulators from Alabama, Kentucky, Mississippi, South Carolina and Tennessee and each of those entities was involved in the settlement. The Securities and Exchange Commission had brought a civil action against the brokerage firm last year with the charge that the company and two of its executives misled investors by inflating the value of assets in its mortgage bond funds.

"The falsification of fund values misrepresented critical information exactly when investors needed it most - when the subprime mortgage meltdown was impacting the funds," said Robert Khuzami, director of the S.E.C.'s enforcement division in a statement. "Such misconduct does grievous harm to investors."

Headquartered in the Morgan Keegan Towers in Memphis, Morgan Keegan has more than 300 offices in 20 states, but its strongholds include Alabama, Mississippi, North Carolina, and Tennessee. The investigation and settlement followed roughly $1.5 billion of estimated investor losses tied to five Morgan Keegan mortgage mutual funds including several "investment-grade" funds marketed as conservative investments for older investors.

Beyond the settlement, another likely reason Regions wants to sell the brokerage firm is to raise money to help it receive approval to repay the $3.5 billion it took from the U.S. Treasury Department's Troubled Asset Relief Program. Most of the nation's other large banks have already received such approval and repaid the money. Regions, though, has remained in a protracted state of recovery difficulty, in part because of bad mortgage loans throughout the gulf coast region it operates so heavily in that expanded rapidly in the housing bubble crisis.