WASHINGTON — The Securities and Exchange Commission may appeal a recent federal court decision tossing out an auction-rate securities case the agency brought against Memphis-based Morgan Keegan & Co.

In a 31-page opinion released Tuesday, Judge William S. Duffey Jr. of the U.S. District Court for the Northern District of Georgia granted summary judgment to Morgan Keegan, saying the firm’s failure to predict the ARS market’s collapse did not rise to the level of securities fraud.

The judge ruled that the SEC — which sought monetary and injunctive relief based on the firm’s allegedly misleading statements to thousands of investors about the liquidity risks associated with ARS — had failed to create a factual dispute sufficient to warrant a trial. The SEC also sought to require Morgan Keegan to buy back all the ARS it sold though March 20, 2008, the month after the market’s collapse.

“The SEC must do more than show a few isolated instances of alleged broker misconduct to obtain the relief it seeks,” Duffey wrote.

In an e-mail Thursday, John Nester, an SEC spokesman, said the commission is considering whether to appeal the judge’s ruling.

The SEC’s complaint, filed in July 2009, stemmed from the collapse of the ARS market in February 2008, when firms that historically supported the auctions, but were under no contractual obligation to do so, stopped propping them up.

Specifically, the SEC alleged that even though Morgan Keegan officials knew about widespread liquidity problems in the market, which were tied to downgrades to bond insurers that backed ARS, the firm’s officials downplayed the risk of the securities and accelerated sales of them to customers in an effort to prevent failure of the auctions it managed.

In late February 2008, the SEC said, the auctions managed by Morgan Keegan began to fail after the firm reached its own inventory limits of the securities. As a result, thousands of the firm’s customers could not liquidate $1.1 billion of ARS holdings underwritten by Morgan Keegan.

In addition, the SEC alleged, the firm continued to sell ARS during the market collapse, selling about $647 million of ARS to 1,145 customers between Jan. 2 and March 19, 2008.

The SEC also alleged that Morgan Keegan had marketed the ARS as “zero risk,” “fully liquid,” “cash alternatives,” “just like a money market,” and “liquid and safe investments.”

In his decision, Duffey focused on Morgan Keegan’s written disclosures, available to customers in 2007 and 2008, about the risks associated with ARS.

He noted that a 24-page manual, which tracked the best practices set forth by the Securities Industry and Financial Markets Association and was posted on the firm’s website, contained a one-page discussion of the risks of auction failures, including illiquidity. Trade confirmations directed customers to the firm’s website for more information about auction procedures. And an ARS brochure, available to customers on request, said there was no assurance any auction would be successful.

In papers opposing the summary judgment motion, the SEC said Morgan Keegan failed to distribute its written disclosures to customers and many customers did not know the potential ARS liquidity risks. The SEC also said four of the firm’s customers, who were deposed in the litigation, testified they did not receive the disclosures or information about them — and their testimony created a factual dispute about whether Morgan Keegan had misled its customers.

But Duffey disagreed, saying the SEC had not introduced any evidence to show Morgan Keegan had “a company-wide policy of encouraging its brokers to misrepresent ARS liquidity risks,” or that the firm was aware its brokers had made misleading statements.

“The only evidence is that four out of the thousands of customers who purchased ARS during the downturn were told that ARS carried little to no risk of illiquidity,” he wrote.

Attorneys for Morgan Keegan did not respond to requests for comment.

A bond attorney who read Duffey’s decision, but was not involved in the litigation, drew a straightforward lesson.

“The court seemed to be saying, if one of those four customers wanted to sue Morgan Keegan, there may or may not be a case,” said Leonard Weiser-Varon, a partner at Mintz, Levin, Cohn, Ferris, Glovsky and Popeo PC in Boston. “But those four customers don’t establish a pattern of misrepresentation by Morgan Keegan.”

The firm was the 12th largest underwriter of ARS between 2000 and 2007, with a par amount of $815 million, according to Thomson Reuters.

On Wednesday, Morgan Keegan announced that it had embarked on the final phase of a voluntary ARS repurchase program, launched in 2009, to repurchase $2 billion of ARS from retail investors who purchased the securities through the firm.

In a statement, John Carson. Morgan Keegan’s chief executive officer, said: “We have been committed to restoring liquidity to our clients since the broad failure in the auction-rate markets, and, with the conclusion of our voluntary repurchase program and a recent favorable court ruling on this matter, we are pleased to bring this to a close.”

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