* Toxic debt caused bond funds to lose much of value

* Regions says market caused losses, cooperating with SEC

* Shares rise nearly 2 pct (New throughout, adds byline)

By Jonathan Stempel

NEW YORK, July 15 (Reuters) - Regions Financial Corp (RF.N: Quote, Profile, Research) said it may face U.S. Securities and Exchange Commission civil charges over seemingly safe bond mutual funds that lost much of their value because of subprime mortgages and other toxic debt.

The Birmingham, Alabama-based bank said the regulator on July 9 filed "Wells" notices against its Morgan Keegan & Co brokerage and Morgan Asset Management Inc units and against three employees.

A Wells notice indicates SEC staff intends to recommend that civil charges be brought, and gives the recipient a chance to mount a defense. Regions disclosed the notices in a regulatory filing.

Several Morgan Keegan bond funds lost well over half their value in 2007 and early 2008 because of exposure to toxic securities often tied to mortgages, such as collateralized debt obligations, as well as investor redemptions.

One such fund, Select Intermediate Bond A, fell 50.3 percent in 2007, while the Select High Income A fund fell 59.7 percent. Both funds also suffered steep declines in 2008.