WASHINGTON — The Securities and Exchange Commission’s auction-rate securities lawsuit against broker-dealer Morgan Keegan & Co., now a subsidiary of Raymond James Financial, is headed back to court.

The 11th Circuit of the U.S. Court of Appeals on Wednesday overturned a lower court’s ruling, handed down in 2011, to toss out the suit the SEC filed against the firm in 2009 for misleading investors who purchased auction-rate securities.

The appeals court remanded the case back to the U.S. District Court for the Northern District of Georgia for further consideration.

The SEC had alleged in its complaint that from late 2007 to February 2008, Morgan Keegan brokers told customers that auction-rate securities were safe investments, using phrases like “as good as cash” and “just like money markets” and certificates of deposit, according to court documents.

The SEC said those statements were made even though Morgan Keegan executives knew the market for auction-rate securities was failing, and despite the firm’s disclosures on its website and in its brochures that auction-rate securities carry unique risks.

But Morgan Keegan argued the SEC failed to show a “material” misrepresentation or omission about ARS’ was made.

The district court sided with the firm and dismissed the case before a trial could be held.

The SEC appealed the lower court’s ruling.

Morgan Keegan argued before the appeals court that the SEC case was based on misrepresentations by four of its brokers and that comments made by a few individual brokers are immaterial. It claimed SEC enforcement actions are designed to protect the “public as a whole,” and not just a “small subset of customers.”

The appeals court disagreed.

“The problem for Morgan Keegan is the SEC enjoys the authority to seek relief for any violation of the securities laws, no matter how small or inconsequential,” the court said in its 44-page decision. “Morgan Keegan cannot show that its oral misstatements were immaterial merely by showing that those statements were not made publicly.”

Morgan Keegan had also argued that it had disclosed the risks of ARS on its website and in brochures. The SEC countered that it took four clicks for an investor to find the disclosures on the website.

The appeals court found the firm’s risk disclosures on its web pages and brochures did not “render its individual brokers’ oral misstatements immaterial.”

“The only written documents that were directly given to ARS purchasers were trade confirmations. But the trade confirmations say absolutely nothing about liquidity risk,” the appeals court said.

The SEC has alleged that Morgan Keegan sold about $647 million worth of auction-rate securities to 1,145 customers between January and March 2008, as the market was failing.

Thousands of the firms customers could not liquidate $1.1 billion of auction-rate holdings as a result of the failure of auctions managed by Morgan Keegan, the SEC said.

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