First Horizon Fined for REG BI Violations regarding Structured Notes

According to a press release on September 18, 2024, the SEC charged First Horizon Advisors, Inc., a registered broker-dealer, for violating Regulation Best Interest (Reg BI) by allegedly failing to maintain and enforce policies designed to comply with the regulation.

First Horizon Advisors Inc.,a national financial advisory firm headquartered in Memphis, TN, reportedly has $12.4 billion under management and employs 239 across the country.

The SEC violations reportedly stem from the firm’s recommendations of structured notes, a type of derivative security. Following a merger in 2021, First Horizon purportedly encountered system incompatibilities, which prevented it from having accurate customer data to assess structured note transactions.

Additionally, representatives allegedly lacked access to compliance tools, and in 2023, the firm purportedly approved structured note recommendations without required documentation.

First Horizon reportedly agreed to pay a $325,000 civil penalty and accepted a cease-and-desist order without admitting or denying the charges.

Structured Notes: Complex Investment

Structured notes are essentially a form of IOU from an investment bank, utilizing derivatives to generate exposure to one or more investments. While these products can provide retail investors with access to strategies typically unavailable to them, the SEC warns that structured notes can be highly complex and carry substantial investment risks. They may not be suitable for many investors.

Regulation Best Interest

Regulation Best Interest (Reg BI) is designed to protect retail investors by requiring broker-dealers to implement, maintain, and enforce written policies and procedures that ensure full compliance with the regulation. Its goal is to minimize the risk of harm to customers, particularly when dealing with complex financial products. It’s not enough for firms to have policies in place—they must also actively enforce them to meet Reg BI’s standards.

Hiring a Securities Attorney

The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm dedicated to helping investors in claims in all 50 states against their financial professional or brokerage firm. Since the firm launched in 2010, it has handled over 700 FINRA arbitration cases. With offices in Chicago, Illinois and Seattle, Washington, we help investors throughout the country in claims against their brokerage firms.

Our firm represents investors in all types of securities related claims, including claims involving stock fraud, broker misrepresentation, churning, unsuitable investments, selling away, and unauthorized trading, among many others.

If you have concerns regarding your structured notes investments, The White Law Group may be able to help you.  To speak with a securities attorney, please call The White Law Group at 888-637-5510.