The Securities and Exchange Commission (SEC) today announced charges against registered broker-dealer First Horizon Advisors, Inc. for failing to maintain and enforce policies and procedures reasonably designed to achieve compliance with Regulation Best Interest (Reg BI).
The charges relate to First Horizon’s recommendations of a type of derivative security called a structured note.
First Horizon agreed to pay a civil penalty of $325,000 to resolve the SEC’s charges.
The SEC’s order finds that First Horizon failed to comply with its Reg BI policies and procedures in multiple ways.
For example, in 2021, First Horizon migrated more than 5,000 customer brokerage accounts to its system from that of a broker dealer with whom First Horizon had merged. Because of incompatibilities in the two systems First Horizon did not have accurate customer information necessary to review structured note recommendations for compliance with First Horizon’s Reg BI policies and procedures.
In addition, the registered representatives who joined First Horizon from the merging broker-dealer did not have access to First Horizon’s exception reporting site to review structured notes transactions flagged as non-compliant, as required by First Horizon’s Reg BI policies and procedures.
The SEC’s order also finds that, in 2023, the firm approved structured note recommendations without all the documentation required by its Reg BI policies and procedures.
The SEC’s order finds that First Horizon violated Reg BI’s Compliance Obligation. Without admitting or denying the SEC’s findings, First Horizon agreed to a cease-and-desist order, a censure, and the above-mentioned civil penalty.
