Broker-dealer charged by SEC over Reg BI violations agrees $325K civil penalty

The Securities and Exchange Commission has charged a registered broker-dealer with violations of Regulation Best Interest.

First Horizon Advisors, LLC, was found to have not maintained and enforced policies that would be reasonably designed to ensure compliance with Reg BI. The charges relate to the firm’s recommendation of structured notes and various failures to comply with Reg Bi were discovered.

The SEC order found that in 2021 First Horizon moved 5000 customer brokerage accounts to its system from a firm with which it had merged, but the incompatibilities of the two firm’s systems left First Horizon without the complete customer data required to review structured note recommendations for compliance with First Horizon’s Reg BI policies and procedures.

Also, the registered representatives who joined First Horizon from the merging broker-dealer were not able to access to First Horizon’s exception reporting site to review structured notes transactions flagged as non-compliant. This was contrary to First Horizon’s policies and procedures.

Without admitting or denying the SEC’s findings, First Horizon agreed to a cease and desist order, a censure, and to pay a $325,000 civil penalty.

“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. “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.”