As a financial analyst and legal expert with over a decade of experience spanning both sectors, I’ve seen firsthand how regulatory actions against broker-dealer firms can significantly impact investors. The recent charges filed by the Securities and Exchange Commission (SEC) against First Horizon Advisors serve as a stark reminder of the importance of compliance with Regulation Best Interest and the potential consequences for firms that fail to maintain adequate policies and procedures.
The Seriousness of the Allegations
According to the SEC’s litigation release, First Horizon Advisors (CRD# 17117) allegedly failed to maintain and enforce policies reasonably designed to achieve compliance with Regulation Best Interest, particularly in relation to their structured note recommendations. The gravity of these charges cannot be overstated, as Regulation Best Interest requires broker-dealers to act in their customers’ best interests when recommending products or strategies.
The firm’s alleged failures occurred in multiple ways, including:
- Migrating 5,000 customer accounts from a merged firm’s system without accurate customer information necessary for compliance review
- Brokers’ inability to access the exception reporting site to review non-compliant structured note transactions
- Approving investment recommendations in 2023 without all required documentation per Regulation BI policies
These missteps can have significant consequences for investors who may have received recommendations that were not in their best interests. Investment fraud and bad advice from financial advisors can lead to substantial losses for unsuspecting clients.
First Horizon Advisors’ Background and Past Complaints
First Horizon Advisors is a Memphis, Tennessee-based broker-dealer firm. As an experienced financial analyst, I always recommend researching a firm’s background and regulatory history before investing. A quick search of First Horizon’s CRD# 17117 on FINRA’s BrokerCheck reveals the firm has been the subject of prior regulatory actions and customer complaints.
While the details of these past issues may vary, they underscore the importance of thorough due diligence when selecting a financial advisor or broker-dealer. Investors should feel empowered to ask questions, request documentation, and ensure they fully understand any recommended products or strategies. Financial advisor complaints can provide valuable insights into a firm’s history and practices.
Understanding Regulation Best Interest
Regulation Best Interest, often referred to as Reg BI, is a crucial investor protection rule implemented by the SEC. In simple terms, it requires broker-dealers and their associated persons to act in the best interest of their retail customers when making recommendations.
This means that firms must:
- Provide full and fair disclosure of all material facts related to the recommendation
- Exercise reasonable diligence, care, and skill in making the recommendation
- Avoid placing their own interests ahead of the customer’s interests
By allegedly failing to maintain compliant policies and procedures, First Horizon Advisors may have jeopardized their ability to fulfill these obligations to their customers.
Lessons Learned and Investor Rights
The charges against First Horizon Advisors serve as a valuable lesson for both investors and financial firms. For investors, it reinforces the importance of staying informed, asking questions, and monitoring your accounts for any suspicious or unauthorized activity. Don’t hesitate to speak up if something doesn’t seem right.
For broker-dealers and financial advisors, this case highlights the critical role of robust compliance policies and procedures. Firms must not only establish these policies but also enforce them consistently and effectively.
As Warren Buffett famously said, “Risk comes from not knowing what you’re doing.” By staying informed and working with reputable, compliant professionals, investors can better navigate the complex world of finance and protect their hard-earned assets.
If you believe you have been impacted by the alleged misconduct at First Horizon Advisors or any other broker-dealer, it’s essential to understand your rights. Consider contacting an experienced securities attorney to discuss your situation and potential legal options.
Remember, approximately 60% of financial advisors have at least one complaint on their record. Don’t let yourself become another statistic. Stay vigilant, stay informed, and don’t hesitate to seek help if needed.
