In re First Horizon Advisors

UNITED STATES OF AMERICA 
 Before the 
 SECURITIES AND EXCHANGE COMMISSION 
 
 
SECURITIES EXCHANGE ACT OF 1934 
Release No. 101071 / September 18, 2024 
 
INVESTMENT ADVISERS ACT OF 1940 
Release No. 6708 / September 18, 2024 
 
ADMINISTRATIVE PROCEEDING 
File No. 3-22142 
 
 
In the Matter of 
 
First Horizon Advisors, Inc. 
 
Respondent. 
ORDER INSTITUTING 
ADMINISTRATIVE AND CEASE-AND-
DESIST PROCEEDINGS, PURSUANT TO 
SECTIONS 15(b) AND 21C OF THE 
SECURITIES EXCHANGE ACT OF 1934 
AND SECTION 203(e) OF THE 
INVESTMENT ADVISERS ACT OF 1940, 
MAKING FINDINGS, AND IMPOSING 
REMEDIAL SANCTIONS AND A CEASE-
AND-DESIST ORDER  
 
 
 I. 
 
The Securities and Exchange Commission (“Commission”) deems it appropriate and in 
the public interest that public administrative and cease-and-desist proceedings be, and hereby 
are, instituted pursuant to Sections 15(b) and 21C of the Securities Exchange Act of 1934 
(“Exchange Act”) and Section 203(e) of the Investment Advisers Act of 1940 (“Advisers Act”) 
against First Horizon Advisors, Inc. (“First Horizon” or “Respondent”). 
 
II. 
 
In anticipation of the institution of these proceedings, Respondent has submitted an 
Offer of Settlement (the “Offer”) which the Commission has determined to accept. Solely for 
the purpose of these proceedings and any other proceedings brought by or on behalf of the 
Commission, or to which the Commission is a party, and without admitting or denying the 
findings herein, except as to the Commission’s jurisdiction over it and the subject matter of 
these proceedings, which are admitted, Respondent consents to the entry of this Order Instituting 
Administrative and Cease-and-Desist Proceedings Pursuant to Sections 15(b) and 21C of the 
Securities Exchange Act of 1934 and Section 203(e) of the Investment Advisers Act of 1940, 
Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order (“Order”), 
as set forth below. 

2 
 
 
III. 
 
On the basis of this Order and Respondent’s Offer, the Commission finds
1
 that: 
 
Summary 
 
1. This proceeding arises out of First Horizon’s failure to comply with Regulation 
Best Interest (“Reg BI”), specifically Reg BI’s Compliance Obligation, which requires broker-
dealers to establish, maintain, and enforce written policies and procedures reasonably designed 
to achieve compliance with Reg BI. Exchange Act Rule 15l-1(a)(2)(iv). Between July 1, 2020, 
and at least July 31, 2023 (“Relevant Period”), First Horizon did not maintain and enforce its Reg 
BI-related policies and procedures for structured notes that First Horizon’s registered 
representatives recommended to retail customers.  
 
2. Relevant to this proceeding, First Horizon’s Reg BI policies and procedures 
applicable to structured note recommendations required its registered representatives to 
determine whether the customer’s investment profile met First Horizon’s requirements; to 
determine whether the resulting customer holdings would not exceed First Horizon’s 
concentration limit for that product type in the brokerage account; to submit to First Horizon 
customer-signed structured note disclosures; and to submit to First Horizon customer-signed 
letters when the customer liquidated holdings in certain products and used those funds to 
purchase a structured note.  
 
3. During the Relevant Period, First Horizon’s Reg BI policies and procedures 
required its Principal Review Desk (“PRD”) to review structured note recommendations to 
help ensure that the transactions complied with First Horizon’s Reg BI policies and 
procedures. From July 1, 2020 until February 2023, PRD reviewed transactions after 
execution. If a transaction did not comply, then PRD was required to create an exception 
report within a specified time limit based on the type of exception. Registered representatives 
were then given 60 days after the creation of exception reports to provide the information or 
documents necessary to bring the transaction into compliance. Given PRD’s exception 
creation schedule and the 60-day grace period to clear exceptions, many exceptions for 
structured note recommendations were created and cleared after the transactions were 
executed. In February 2023, First Horizon’s Reg BI policies and procedures changed to 
require that PRD review and approve structured note recommendations before the transactions 
were executed.  
 
4. First Horizon Corporation merged with IberiaBank Corporation in July 2020. 
Beginning in January 2021, Iberia Financial Services LLC (“merging broker-dealer”) 
                                                 
1
 The findings herein are made pursuant to Respondent’s Offer of Settlement and are not 
binding on any other person or entity in this or any other proceeding. 
 

3 
 
terminated its preexisting networking arrangement and First Horizon integrated their 
operations. As a result, the customer accounts of the merging broker-dealer were migrated to 
First Horizon. Registered representatives from the merging broker-dealer became First 
Horizon’s registered representatives (“new First Horizon registered representatives”) 
following the integration.  
 
5. First Horizon was aware several months prior to the integration that certain 
customer investment profile information would not map properly from the merging broker-
dealer’s clearing firm to First Horizon’s clearing firm because of differing profile fields and 
that certain other information would not transfer at all. For over a year following First 
Horizon’s operations integration with the merging broker-dealer, First Horizon failed to 
maintain or enforce its Reg BI policies and procedures for the acquired customer accounts and 
the new First Horizon registered representatives that serviced those accounts. First Horizon’s 
systems did not have accurate customer investment profile and customer holdings information 
for the acquired accounts, and this information was necessary for PRD to determine whether 
new structured note recommendations complied with First Horizon’s Reg BI policies and 
procedures. Additionally, new First Horizon registered representatives did not have access to 
First Horizon’s exception reporting site to review and clear exceptions related to their 
structured note recommendations to the retail customers whose accounts First Horizon had 
acquired in the merger.  
 
6. In addition, for at least three years after the implementation of Reg BI in July 
2020, First Horizon also did not maintain or enforce certain Reg BI policies and procedures 
applicable to structured note recommendations made by its new First Horizon and legacy First 
Horizon registered representatives (broadly “registered representatives”). For at least several 
hundred structured note recommendations, PRD failed to comply with its Reg BI policies and 
procedures in effect at the time. For example, First Horizon failed to create exception reports, 
or First Horizon’s registered representatives failed to clear exceptions, within the times 
specified in First Horizon’s policies and procedures. Additionally, after First Horizon’s Reg BI 
policies and procedures were revised to require PRD to review structured note 
recommendations for compliance prior to purchase, First Horizon approved structured note 
recommendations for which a “switch letter” was not on file prior to execution.  
 
7. As a result of these failures, First Horizon failed to maintain and enforce 
written policies and procedures reasonably designed to achieve compliance with the 
Compliance Obligation and willfully violated the General Obligation of Reg BI, found in Rule 
15l-1(a)(1) of the Exchange Act (“General Obligation”).  
 
Respondent 
 
8. First Horizon Advisors, Inc. is a Tennessee corporation with its principal 
place of business in Memphis, Tennessee. First Horizon has been registered with the 
Commission as a broker-dealer since 1985, and as an investment adviser since 2013. First 
Horizon is a wholly owned subsidiary of First Horizon Bank, and First Horizon Bank is a 

4 
 
wholly owned subsidiary of First Horizon Corporation.  
 
Facts 
 
First Horizon’s Reg BI Policies and Procedures 
 
9. During the Relevant Period, First Horizon’s Reg BI policies and procedures 
required its registered representatives to take certain actions, including when recommending 
structured notes to retail customers. For example, registered representatives had to determine 
that the customer’s investment profile met First Horizon’s requirements for structured notes 
and that the resulting holdings would not exceed First Horizon’s concentration limit for 
structured notes in the customer’s account. The registered representatives also were required to 
upload to First Horizon’s systems a customer-signed Structured Products Disclosure and 
Customer Acknowledgement Form that indicated the customer, among other things, received 
the product prospectus that included the product fees; understood that First Horizon received 
compensation for selling structured notes; and understood that structured notes are buy-and-
hold investments involving principal risk. If the customer was using the proceeds from selling 
a structured note (or certain other products) before the product matured to purchase another 
structured note, then the registered representatives also had to upload a customer-signed 
investment letter or “switch letter” that included disclosures about the sale and purchase fees 
and information about why the structured note recommendation was “appropriate” for the 
customer. 
 
10. During the Relevant Period, First Horizon’s Reg BI policies and procedures 
required PRD to review structured product recommendations to determine whether they 
complied with its Reg BI policies and procedures. Accordingly, PRD relied on the information 
in its systems to determine whether the customer’s investment profile met First Horizon’s 
requirements for structured notes, whether the resulting holdings would exceed First Horizon’s 
concentration limit for structured notes in the customer’s account, whether the completed 
Structured Products Disclosure and Customer Acknowledgement Form was uploaded, and, if 
applicable, whether the completed “switch letter” was uploaded. If any of these requirements 
were not met, the Reg BI policies and procedures set forth what PRD was required to do next. 
 
11. Until February 2023, First Horizon’s policies and procedures required PRD to 
create exception reports for trades that were flagged as non-compliant. Registered representatives 
had 60 days after the exception report was created to clear the exception by submitting the 
necessary investment profile or customer holdings information or documents to make the 
recommendation comply with First Horizon’s Reg BI policies and procedures. Beginning in 
February 2023, First Horizon implemented a preapproval requirement for structured notes, 
requiring that any recommendation comply with First Horizon’s Reg BI policies and procedures 
before the transaction was executed. The preapproval requirement meant that PRD had to review 
and approve or reject structured note recommendations prior to execution. First Horizon later 
implemented an automated tool to review the recommendations. Following this implementation, 
PRD reviewed any recommendations that the automated tool had flagged as not compliant with 

5 
 
First Horizon’s Reg BI policies and procedures.  
 
First Horizon Failed to Resolve Known Compliance System  
Deficiencies Related to the Merger 
 
12. In October 2020, several months prior to First Horizon’s integration with the 
merging broker-dealer, First Horizon learned that certain customer investment profile 
information, such as risk tolerance and investment time horizon, would not map from the 
merging broker-dealer’s systems to the comparable fields in First Horizon’s systems, and that 
other information—such as investible assets—would not transfer at all. PRD relied on this 
customer investment profile information to determine whether new structured note 
recommendations for those accounts complied with First Horizon’s Reg BI policies and 
procedures. Although PRD notified the new First Horizon Representatives that they were 
required to complete a Customer Profile Update form for new recommendations made after 
the integration, in some cases, the new First Horizon Representatives failed to complete the 
Customer Profile Update as required. First Horizon moved forward with the integration in 
January 2021, migrating 5,442 customer brokerage accounts without taking adequate steps to 
help ensure that its systems had the necessary customer investment profile information for 
PRD to maintain and enforce First Horizon’s Reg BI policies and procedures.    
 
13. In February 2021, First Horizon learned that technology issues prevented the 
new First Horizon registered representatives from accessing First Horizon’s exception 
reporting site to review exception reports related to their recommendations and to provide new 
information or documentation needed to comply with First Horizon’s Reg BI policies and 
procedures. First Horizon determined that the new First Horizon registered representatives 
would not be able to access the exception reporting site until the operations integration was 
complete, which was not expected to occur for at least several months.
 
Throughout this 
process, the new First Horizon registered representatives worked with First Horizon staff to 
clear exceptions and mitigate the technology issues. Nonetheless, First Horizon continued with 
the operations integration without taking adequate steps to help ensure that the new First 
Horizon registered representatives cleared the exception reports within the required 60 days. 
The new First Horizon registered representatives were not able to access the exception 
reporting site until April 2022—over a year after the discovery of the issue—and were 
permitted an additional three months, until July 2022, by First Horizon to clear their 
backlogged exceptions.  
  
14. For the foregoing reasons, between January 2021 and April 2022, First Horizon 
did not maintain and enforce written policies and procedures reasonably designed to achieve 
compliance with Reg BI for the new First Horizon registered representatives’ 
recommendations of structured notes. 

6 
 
 
First Horizon Failed to Maintain and Enforce Certain Reg BI Policies and Procedures 
Concerning Structured Note Recommendations 
 
15. Until February 2023, PRD was required to create exception reports when 
structured note recommendations did not comply with First Horizon’s Reg BI policies and 
procedures because the customer investment profile information did not meet First Horizon’s 
structured note requirements, the resulting holdings would not comply with First Horizon’s 
concentration limits for structured products in the customer’s account, a completed Structured 
Note Disclosure and Customer Acknowledgement Form was not uploaded, or, where 
applicable, a completed “switch letter” was not uploaded. PRD was required to create the 
exception reports within specified times depending on the type of exception. First Horizon’s 
registered representatives were required to clear structured note exceptions within 60 days after 
the exception reports were created.  
 
16. First Horizon generated at least 2,500 exceptions on structured note 
recommendations. PRD did not timely create exception reports, and registered representatives 
did not timely clear exceptions, for at least several hundred of these structured note 
recommendations.
 
 
 
17. Beginning in February 2023, when First Horizon’s written Reg BI policies and 
procedures required that structured note recommendations be reviewed and approved for 
compliance prior to execution, PRD approved structured note recommendations for which a 
“switch letter” was not on file prior to execution.  
 
18. As a result of the conduct described above, First Horizon failed to satisfy the 
General Obligation under Reg BI and willfully
2
 violated Rule 15l-1(a)(1) of the Exchange Act. 
 
IV. 
 
In view of the foregoing, the Commission deems it appropriate and in the public interest 
                                                 
2
 “Willfully,” for purposes of imposing relief under Section 15(b) of the Exchange Act and 
Section 203(e) of the Advisers Act, “‘means no more than that the person charged with the duty 
knows what he is doing.’” Wonsover v. SEC,  205  F.3d  408,  414  (D.C.  Cir.  2000)  (quoting 
Hughes v. SEC, 174 F.2d 969, 977 (D.C. Cir. 1949)). There  is  no requirement that the actor 
“also be aware that he is violating one of the Rules or Acts.” Tager v. SEC, 344 F.2d 5, 8 (2d 
Cir. 1965). The decision in The Robare Group,  Ltd.  v.  SEC,  which  construed  the  term 
“willfully”  for purposes of a differently structured statutory provision, does  not alter that 
standard. 922 F.3d 468, 478-79 (D.C. Cir. 2019) (setting forth the showing required to establish 
that a person  has “willfully  omit[ted]” material  information  from a required disclosure  in 
violation of Section 207 of the Advisers Act). 
 

7 
 
to impose the sanctions agreed to in Respondent’s Offer. 
 
Accordingly, pursuant to Sections 15(b) and 21C of the Exchange Act and Section 203(e) of 
the Advisers Act, it is hereby ORDERED that: 
 
A. Respondent cease and desist from committing or causing any violations and 
any future violations of Exchange Act Rule 15l-1(a)(1). 
 
B. Respondent is censured. 
 
C. Respondent shall, within 21 days of the entry of this Order, pay a civil money 
penalty in the amount of $325,000 to the Securities and Exchange Commission for transfer to 
the general fund of the United States Treasury, subject to Exchange Act Section 21F(g)(3). If 
timely payment is not made, additional interest shall accrue pursuant to 31 U.S.C. §3717. 
Payment must be made in one of the following ways: 
 
(1) Respondent may transmit payment electronically to the Commission, 
which will provide detailed ACH transfer/Fedwire instructions upon 
request; 
 
(2) Respondent may make direct payment from a bank account via 
Pay.gov through the SEC website at 
http://www.sec.gov/about/offices/ofm.htm; or 
 
(3) Respondent may pay by certified check, bank cashier’s check, or 
United States postal money order, made payable to the Securities and 
Exchange Commission and hand-delivered or mailed to: 
 
Enterprise Services Center 
Accounts Receivable Branch  
HQ Bldg., Room 181, AMZ-341 
6500 South MacArthur Boulevard 
Oklahoma City, OK 73169 
 
Payments by check or money order must be accompanied by a cover letter identifying 
First Horizon as a Respondent in these proceedings, and the file number of these proceedings; a 
copy of the cover letter and check or money order must be sent to Osman Nawaz, Chief, Complex 
Financial Instruments Unit, Division of Enforcement, Securities and Exchange Commission, 100 Pearl 
Street, Suite 20-100, New York, NY 10004. 
 
D. Amounts ordered to be paid as civil money penalties pursuant to this Order shall 
be treated as penalties paid to the government for all purposes, including all tax purposes. To 
preserve the deterrent effect of the civil penalty, Respondent agrees that in any Related 
Investor Action, it shall not argue that it is entitled to, nor shall it benefit by, offset or reduction 

8 
 
of any award of compensatory damages by the amount of any part of Respondent’s payment of 
a civil penalty in this action (“Penalty Offset”). If the court in any Related Investor Action 
grants such a Penalty Offset, Respondent agrees that it shall, within 30 days after entry of a 
final order granting the Penalty Offset, notify the Commission’s counsel in this action and pay 
the amount of the Penalty Offset to the Securities and Exchange Commission. Such a payment 
shall not be deemed an additional civil penalty and shall not be deemed to change the amount 
of the civil penalty imposed in this proceeding. For purposes of this paragraph, a “Related 
Investor Action” means a private damages action brought against Respondent by or on behalf of 
one or more investors based on substantially the same facts as alleged in the Order instituted by 
the Commission in this proceeding. 
 
By the Commission. 
 
 
Vanessa A. Countryman 
Secretary 
 

UNITED STATES OF AMERICA 

 Before the 

 SECURITIES AND EXCHANGE COMMISSION 

 

 

SECURITIES EXCHANGE ACT OF 1934 

Release No. 101071 / September 18, 2024 

 

INVESTMENT ADVISERS ACT OF 1940 

Release No. 6708 / September 18, 2024 

 

ADMINISTRATIVE PROCEEDING 

File No. 3-22142 

 

 

In the Matter of 

 

First Horizon Advisors, Inc. 

 

Respondent. 

ORDER INSTITUTING 

ADMINISTRATIVE AND CEASE-AND-

DESIST PROCEEDINGS, PURSUANT TO 

SECTIONS 15(b) AND 21C OF THE 

SECURITIES EXCHANGE ACT OF 1934 

AND SECTION 203(e) OF THE 

INVESTMENT ADVISERS ACT OF 1940, 

MAKING FINDINGS, AND IMPOSING 

REMEDIAL SANCTIONS AND A CEASE-

AND-DESIST ORDER  

 

 

 I. 

 

The Securities and Exchange Commission (“Commission”) deems it appropriate and in 

the public interest that public administrative and cease-and-desist proceedings be, and hereby 

are, instituted pursuant to Sections 15(b) and 21C of the Securities Exchange Act of 1934 

(“Exchange Act”) and Section 203(e) of the Investment Advisers Act of 1940 (“Advisers Act”) 

against First Horizon Advisors, Inc. (“First Horizon” or “Respondent”). 

 

II. 

 

In anticipation of the institution of these proceedings, Respondent has submitted an 

Offer of Settlement (the “Offer”) which the Commission has determined to accept. Solely for 

the purpose of these proceedings and any other proceedings brought by or on behalf of the 

Commission, or to which the Commission is a party, and without admitting or denying the 

findings herein, except as to the Commission’s jurisdiction over it and the subject matter of 

these proceedings, which are admitted, Respondent consents to the entry of this Order Instituting 

Administrative and Cease-and-Desist Proceedings Pursuant to Sections 15(b) and 21C of the 

Securities Exchange Act of 1934 and Section 203(e) of the Investment Advisers Act of 1940, 

Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order (“Order”), 

as set forth below. 



2 

 

 

III. 

 

On the basis of this Order and Respondent’s Offer, the Commission finds1 that: 

 

Summary 

 

1. This proceeding arises out of First Horizon’s failure to comply with Regulation 

Best Interest (“Reg BI”), specifically Reg BI’s Compliance Obligation, which requires broker-

dealers to establish, maintain, and enforce written policies and procedures reasonably designed 

to achieve compliance with Reg BI. Exchange Act Rule 15l-1(a)(2)(iv). Between July 1, 2020, 

and at least July 31, 2023 (“Relevant Period”), First Horizon did not maintain and enforce its Reg 

BI-related policies and procedures for structured notes that First Horizon’s registered 

representatives recommended to retail customers.  

 

2. Relevant to this proceeding, First Horizon’s Reg BI policies and procedures 

applicable to structured note recommendations required its registered representatives to 

determine whether the customer’s investment profile met First Horizon’s requirements; to 

determine whether the resulting customer holdings would not exceed First Horizon’s 

concentration limit for that product type in the brokerage account; to submit to First Horizon 

customer-signed structured note disclosures; and to submit to First Horizon customer-signed 

letters when the customer liquidated holdings in certain products and used those funds to 

purchase a structured note.  

 

3. During the Relevant Period, First Horizon’s Reg BI policies and procedures 

required its Principal Review Desk (“PRD”) to review structured note recommendations to 

help ensure that the transactions complied with First Horizon’s Reg BI policies and 

procedures. From July 1, 2020 until February 2023, PRD reviewed transactions after 

execution. If a transaction did not comply, then PRD was required to create an exception 

report within a specified time limit based on the type of exception. Registered representatives 

were then given 60 days after the creation of exception reports to provide the information or 

documents necessary to bring the transaction into compliance. Given PRD’s exception 

creation schedule and the 60-day grace period to clear exceptions, many exceptions for 

structured note recommendations were created and cleared after the transactions were 

executed. In February 2023, First Horizon’s Reg BI policies and procedures changed to 

require that PRD review and approve structured note recommendations before the transactions 

were executed.  

 

4. First Horizon Corporation merged with IberiaBank Corporation in July 2020. 

Beginning in January 2021, Iberia Financial Services LLC (“merging broker-dealer”) 

                                                 

1 The findings herein are made pursuant to Respondent’s Offer of Settlement and are not 

binding on any other person or entity in this or any other proceeding. 

 



3 

 

terminated its preexisting networking arrangement and First Horizon integrated their 

operations. As a result, the customer accounts of the merging broker-dealer were migrated to 

First Horizon. Registered representatives from the merging broker-dealer became First 

Horizon’s registered representatives (“new First Horizon registered representatives”) 

following the integration.  

 

5. First Horizon was aware several months prior to the integration that certain 

customer investment profile information would not map properly from the merging broker-

dealer’s clearing firm to First Horizon’s clearing firm because of differing profile fields and 

that certain other information would not transfer at all. For over a year following First 

Horizon’s operations integration with the merging broker-dealer, First Horizon failed to 

maintain or enforce its Reg BI policies and procedures for the acquired customer accounts and 

the new First Horizon registered representatives that serviced those accounts. First Horizon’s 

systems did not have accurate customer investment profile and customer holdings information 

for the acquired accounts, and this information was necessary for PRD to determine whether 

new structured note recommendations complied with First Horizon’s Reg BI policies and 

procedures. Additionally, new First Horizon registered representatives did not have access to 

First Horizon’s exception reporting site to review and clear exceptions related to their 

structured note recommendations to the retail customers whose accounts First Horizon had 

acquired in the merger.  

 

6. In addition, for at least three years after the implementation of Reg BI in July 

2020, First Horizon also did not maintain or enforce certain Reg BI policies and procedures 

applicable to structured note recommendations made by its new First Horizon and legacy First 

Horizon registered representatives (broadly “registered representatives”). For at least several 

hundred structured note recommendations, PRD failed to comply with its Reg BI policies and 

procedures in effect at the time. For example, First Horizon failed to create exception reports, 

or First Horizon’s registered representatives failed to clear exceptions, within the times 

specified in First Horizon’s policies and procedures. Additionally, after First Horizon’s Reg BI 

policies and procedures were revised to require PRD to review structured note 

recommendations for compliance prior to purchase, First Horizon approved structured note 

recommendations for which a “switch letter” was not on file prior to execution.  

 

7. As a result of these failures, First Horizon failed to maintain and enforce 

written policies and procedures reasonably designed to achieve compliance with the 

Compliance Obligation and willfully violated the General Obligation of Reg BI, found in Rule 

15l-1(a)(1) of the Exchange Act (“General Obligation”).  

 

Respondent 

 

8. First Horizon Advisors, Inc. is a Tennessee corporation with its principal 

place of business in Memphis, Tennessee. First Horizon has been registered with the 

Commission as a broker-dealer since 1985, and as an investment adviser since 2013. First 

Horizon is a wholly owned subsidiary of First Horizon Bank, and First Horizon Bank is a 



4 

 

wholly owned subsidiary of First Horizon Corporation.  

 

Facts 

 

First Horizon’s Reg BI Policies and Procedures 

 

9. During the Relevant Period, First Horizon’s Reg BI policies and procedures 

required its registered representatives to take certain actions, including when recommending 

structured notes to retail customers. For example, registered representatives had to determine 

that the customer’s investment profile met First Horizon’s requirements for structured notes 

and that the resulting holdings would not exceed First Horizon’s concentration limit for 

structured notes in the customer’s account. The registered representatives also were required to 

upload to First Horizon’s systems a customer-signed Structured Products Disclosure and 

Customer Acknowledgement Form that indicated the customer, among other things, received 

the product prospectus that included the product fees; understood that First Horizon received 

compensation for selling structured notes; and understood that structured notes are buy-and-

hold investments involving principal risk. If the customer was using the proceeds from selling 

a structured note (or certain other products) before the product matured to purchase another 

structured note, then the registered representatives also had to upload a customer-signed 

investment letter or “switch letter” that included disclosures about the sale and purchase fees 

and information about why the structured note recommendation was “appropriate” for the 

customer. 

 

10. During the Relevant Period, First Horizon’s Reg BI policies and procedures 

required PRD to review structured product recommendations to determine whether they 

complied with its Reg BI policies and procedures. Accordingly, PRD relied on the information 

in its systems to determine whether the customer’s investment profile met First Horizon’s 

requirements for structured notes, whether the resulting holdings would exceed First Horizon’s 

concentration limit for structured notes in the customer’s account, whether the completed 

Structured Products Disclosure and Customer Acknowledgement Form was uploaded, and, if 

applicable, whether the completed “switch letter” was uploaded. If any of these requirements 

were not met, the Reg BI policies and procedures set forth what PRD was required to do next. 

 

11. Until February 2023, First Horizon’s policies and procedures required PRD to 

create exception reports for trades that were flagged as non-compliant. Registered representatives 

had 60 days after the exception report was created to clear the exception by submitting the 

necessary investment profile or customer holdings information or documents to make the 

recommendation comply with First Horizon’s Reg BI policies and procedures. Beginning in 

February 2023, First Horizon implemented a preapproval requirement for structured notes, 

requiring that any recommendation comply with First Horizon’s Reg BI policies and procedures 

before the transaction was executed. The preapproval requirement meant that PRD had to review 

and approve or reject structured note recommendations prior to execution. First Horizon later 

implemented an automated tool to review the recommendations. Following this implementation, 

PRD reviewed any recommendations that the automated tool had flagged as not compliant with 



5 

 

First Horizon’s Reg BI policies and procedures.  

 

First Horizon Failed to Resolve Known Compliance System  

Deficiencies Related to the Merger 

 

12. In October 2020, several months prior to First Horizon’s integration with the 

merging broker-dealer, First Horizon learned that certain customer investment profile 

information, such as risk tolerance and investment time horizon, would not map from the 

merging broker-dealer’s systems to the comparable fields in First Horizon’s systems, and that 

other information—such as investible assets—would not transfer at all. PRD relied on this 

customer investment profile information to determine whether new structured note 

recommendations for those accounts complied with First Horizon’s Reg BI policies and 

procedures. Although PRD notified the new First Horizon Representatives that they were 

required to complete a Customer Profile Update form for new recommendations made after 

the integration, in some cases, the new First Horizon Representatives failed to complete the 

Customer Profile Update as required. First Horizon moved forward with the integration in 

January 2021, migrating 5,442 customer brokerage accounts without taking adequate steps to 

help ensure that its systems had the necessary customer investment profile information for 

PRD to maintain and enforce First Horizon’s Reg BI policies and procedures.    

 

13. In February 2021, First Horizon learned that technology issues prevented the 

new First Horizon registered representatives from accessing First Horizon’s exception 

reporting site to review exception reports related to their recommendations and to provide new 

information or documentation needed to comply with First Horizon’s Reg BI policies and 

procedures. First Horizon determined that the new First Horizon registered representatives 

would not be able to access the exception reporting site until the operations integration was 

complete, which was not expected to occur for at least several months. Throughout this 

process, the new First Horizon registered representatives worked with First Horizon staff to 

clear exceptions and mitigate the technology issues. Nonetheless, First Horizon continued with 

the operations integration without taking adequate steps to help ensure that the new First 

Horizon registered representatives cleared the exception reports within the required 60 days. 

The new First Horizon registered representatives were not able to access the exception 

reporting site until April 2022—over a year after the discovery of the issue—and were 

permitted an additional three months, until July 2022, by First Horizon to clear their 

backlogged exceptions.  

  

14. For the foregoing reasons, between January 2021 and April 2022, First Horizon 

did not maintain and enforce written policies and procedures reasonably designed to achieve 

compliance with Reg BI for the new First Horizon registered representatives’ 

recommendations of structured notes. 



6 

 

 

First Horizon Failed to Maintain and Enforce Certain Reg BI Policies and Procedures 

Concerning Structured Note Recommendations 

 

15. Until February 2023, PRD was required to create exception reports when 

structured note recommendations did not comply with First Horizon’s Reg BI policies and 

procedures because the customer investment profile information did not meet First Horizon’s 

structured note requirements, the resulting holdings would not comply with First Horizon’s 

concentration limits for structured products in the customer’s account, a completed Structured 

Note Disclosure and Customer Acknowledgement Form was not uploaded, or, where 

applicable, a completed “switch letter” was not uploaded. PRD was required to create the 

exception reports within specified times depending on the type of exception. First Horizon’s 

registered representatives were required to clear structured note exceptions within 60 days after 

the exception reports were created.  

 

16. First Horizon generated at least 2,500 exceptions on structured note 

recommendations. PRD did not timely create exception reports, and registered representatives 

did not timely clear exceptions, for at least several hundred of these structured note 

recommendations.  

 

17. Beginning in February 2023, when First Horizon’s written Reg BI policies and 

procedures required that structured note recommendations be reviewed and approved for 

compliance prior to execution, PRD approved structured note recommendations for which a 

“switch letter” was not on file prior to execution.  

 

18. As a result of the conduct described above, First Horizon failed to satisfy the 

General Obligation under Reg BI and willfully2 violated Rule 15l-1(a)(1) of the Exchange Act. 

 

IV. 

 

In view of the foregoing, the Commission deems it appropriate and in the public interest 

                                                 
2 “Willfully,” for purposes of imposing relief under Section 15(b) of the Exchange Act and 

Section 203(e) of the Advisers Act, “‘means no more than that the person charged with the duty 

knows what he is doing.’” Wonsover v. SEC, 205 F.3d 408, 414 (D.C. Cir. 2000) (quoting 

Hughes v. SEC, 174 F.2d 969, 977 (D.C. Cir. 1949)). There is no requirement that the actor 

“also be aware that he is violating one of the Rules or Acts.” Tager v. SEC, 344 F.2d 5, 8 (2d 

Cir. 1965). The decision in The Robare Group, Ltd. v. SEC, which construed the term 

“willfully” for purposes of a differently structured statutory provision, does not alter that 

standard. 922 F.3d 468, 478-79 (D.C. Cir. 2019) (setting forth the showing required to establish 

that a person has “willfully omit[ted]” material information from a required disclosure in 

violation of Section 207 of the Advisers Act). 

 



7 

 

to impose the sanctions agreed to in Respondent’s Offer. 

 

Accordingly, pursuant to Sections 15(b) and 21C of the Exchange Act and Section 203(e) of 

the Advisers Act, it is hereby ORDERED that: 

 

A. Respondent cease and desist from committing or causing any violations and 

any future violations of Exchange Act Rule 15l-1(a)(1). 

 

B. Respondent is censured. 

 

C. Respondent shall, within 21 days of the entry of this Order, pay a civil money 

penalty in the amount of $325,000 to the Securities and Exchange Commission for transfer to 

the general fund of the United States Treasury, subject to Exchange Act Section 21F(g)(3). If 

timely payment is not made, additional interest shall accrue pursuant to 31 U.S.C. §3717. 

Payment must be made in one of the following ways: 

 

(1) Respondent may transmit payment electronically to the Commission, 

which will provide detailed ACH transfer/Fedwire instructions upon 

request; 

 

(2) Respondent may make direct payment from a bank account via 

Pay.gov through the SEC website at 

http://www.sec.gov/about/offices/ofm.htm; or 

 

(3) Respondent may pay by certified check, bank cashier’s check, or 

United States postal money order, made payable to the Securities and 

Exchange Commission and hand-delivered or mailed to: 

 

Enterprise Services Center 

Accounts Receivable Branch  

HQ Bldg., Room 181, AMZ-341 

6500 South MacArthur Boulevard 

Oklahoma City, OK 73169 

 

Payments by check or money order must be accompanied by a cover letter identifying 

First Horizon as a Respondent in these proceedings, and the file number of these proceedings; a 

copy of the cover letter and check or money order must be sent to Osman Nawaz, Chief, Complex 

Financial Instruments Unit, Division of Enforcement, Securities and Exchange Commission, 100 Pearl 

Street, Suite 20-100, New York, NY 10004. 

 

D. Amounts ordered to be paid as civil money penalties pursuant to this Order shall 

be treated as penalties paid to the government for all purposes, including all tax purposes. To 

preserve the deterrent effect of the civil penalty, Respondent agrees that in any Related 

Investor Action, it shall not argue that it is entitled to, nor shall it benefit by, offset or reduction 



8 

 

of any award of compensatory damages by the amount of any part of Respondent’s payment of 

a civil penalty in this action (“Penalty Offset”). If the court in any Related Investor Action 

grants such a Penalty Offset, Respondent agrees that it shall, within 30 days after entry of a 

final order granting the Penalty Offset, notify the Commission’s counsel in this action and pay 

the amount of the Penalty Offset to the Securities and Exchange Commission. Such a payment 

shall not be deemed an additional civil penalty and shall not be deemed to change the amount 

of the civil penalty imposed in this proceeding. For purposes of this paragraph, a “Related 

Investor Action” means a private damages action brought against Respondent by or on behalf of 

one or more investors based on substantially the same facts as alleged in the Order instituted by 

the Commission in this proceeding. 

 

By the Commission. 

 

 

Vanessa A. Countryman 

Secretary 

 


	UNITED STATES OF AMERICA
	I.
	II.
	III.
	Summary
	Respondent

	IV.