SEC Hits First Horizon With $325,000 Reg BI Fine

The Securities and Exchange Commission said Wednesday that it has charged registered broker-dealer First Horizon Advisors Inc. with failing to maintain and enforce policies and procedures reasonably designed to achieve compliance with Regulation Best Interest after its merger with IberiaBank.

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 charges. The SEC’s order found that First Horizon violated Reg BI’s compliance obligation.

First Horizon Corp. merged with IberiaBank Corp. in July 2020. The combined firm kept the First Horizon name. First Horizon Advisors had $68 billion in assets as of Dec. 31.

Multiple Violations

The SEC’s order states 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 the BD Iberia Financial Services LLC, according to the SEC.

“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,” the SEC said.

Also, the registered representatives who joined First Horizon from IberiaBank “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 order states.

Further, in 2023, the firm approved structured note recommendations without all the documentation required by its Reg BI policies and procedures.

“To help reduce the chance of retail customer harm, Reg BI requires broker-dealers to establish, maintain, and enforce written policies and procedures reasonably designed to achieve compliance with Reg BI as a whole,” said Osman Nawaz, chief of the SEC Enforcement Division’s Complex Financial Instruments Unit, in a statement.

“This action underscores that broker-dealers must ensure appropriate compliance around complex financial products and that it is not enough to simply have written policies; firms must also enforce them.”

Without admitting or denying the SEC’s findings, First Horizon agreed to a cease-and-desist order, a censure and the civil penalty.