Pomerantz Law Firm Announces the Filing of a Class Action Against First Horizon Corporation, The Toronto-Dominion Bank, TD Bank US Holding Company, and Certain Officers - FHN

Pomerantz Law Firm Announces the Filing of a Class Action Against First Horizon Corporation, The Toronto-Dominion Bank, TD Bank US Holding Company, and Certain Officers - FHN

PR Newswire

NEW YORK, June 23, 2023 /PRNewswire/ -- Pomerantz LLP announces that a class action lawsuit has been filed against First Horizon Corporation ("FHN") (NYSE: FHN), The Toronto-Dominion Bank and its subsidiaries, including wholly owned subsidiary TD Bank US Holding Company (collectively, "TD Bank" and, together with FHN, the "Companies"), and certain officers. The class action, filed in the United States District Court for the District of New Jersey, and docketed under 23-cv-03024, is on behalf of a class consisting of all persons and entities other than Defendants that purchased or otherwise acquired FHN securities between February 28, 2022 and May 3, 2023, both dates inclusive (the "Class Period"), to recover damages from the Defendants for their violations of the federal securities laws under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, as detailed below.

If you are a shareholder who purchased or otherwise acquired FHN securities during the Class Period, you have until July 21, 2023 to ask the Court to appoint you as Lead Plaintiff for the class. A copy of the Complaint can be obtained at www.pomerantzlaw.com. To discuss this action, contact Robert S. Willoughby at [email protected] or 888.476.6529 (or 888.4-POMLAW), toll-free, Ext. 7980. Those who inquire by e-mail are encouraged to include their mailing address, telephone number, and the number of shares purchased. 

[Click here for information about joining the class action]

FHN is a bank holding company headquartered in Memphis, Tennessee that, as of December 31, 2022, had consolidated assets of $79 billion. FHN provides consumer and commercial banking, wealth management, mortgage lending and other financial services primarily through its principal subsidiary, First Horizon Bank. As of December 31, 2022, FHN operated 414 banking centers in twelve states.

TD Bank is a Canadian financial institution with U.S. headquarters in New Jersey. As of October 31, 2022, TD Bank had $1.9 trillion in assets. Since 2004, TD Bank has expanded its retail banking presence in the U.S. through acquisitions of regional banks. 

On February 28, 2022, FHN and TD Bank jointly announced that TD Bank had agreed to acquire FHN for $25.00 per share in cash ("Transaction"), which represented a 37% premium to FHN's share price from its close on the prior trading day.

With respect to the timeline for closing the Transaction, a joint press release ("Feb 2022 Press Release") issued by TD Bank and FHN on February 28, 2022, announcing the deal explained that the "transaction is expected to close in the first quarter of TD's 2023 fiscal year, and is subject to customary closing conditions, including approvals from First Horizon's shareholders and U.S. and Canadian regulatory authorities." The Feb 2022 Press Release further advised that (i) if "the transaction does not close prior to November 27, 2022 [i.e., within 9 months], First Horizon shareholders will receive, at closing, an additional US$0.65 per share on an annualized basis for the period from November 27, 2022 through the day immediately prior to the closing," and (ii) "[t]he transaction will terminate, unless otherwise extended, if it does not close by February 27, 2023."

On a conference call to discuss the Transaction held on February 28, 2022, an analyst observed that "there's a lot of sensitivity around regulatory approval process for M&A in the U.S.," and then asked TD Bank's senior management about their "comfort level on getting deal closing done" within the timeline announced.

The Complaint alleges that, throughout the Class Period, Defendants made materially false and misleading statements and omissions concerning the risks to regulatory approval of the Transaction posed by TD Bank's materially deficient anti-money laundering ("AML") policies and procedures, which caused Plaintiff and other Class members to suffer significant losses when these undisclosed regulatory risks materialized and caused the market value of FHN's securities to decline precipitously.

On August 25, 2022, on TD Bank's Q3 2022 earnings call, TD Bank's Group President and Chief Executive Officer ("CEO"), Defendant Bharat B. Masrani ("Masrani"), reiterated that he expected the Transaction "to close in the first fiscal quarter of 2023." When asked about any risks that may delay the Transaction from closing, Defendant Masrani responded, "[o]ur deal continues to progress in the normal course, there is nothing out there to suggest that, that is different this time around."

Defendant Masrani was not the only TD Bank executive to reassure analysts concerning the timeline for closing the Transaction. On September 14, 2022, at the Barclays Global Financial Services Conference, when asked for an update on the timeline for the Transaction, Defendant Leo Salom ("Salom"), Group Head, U.S. Retail, TD Bank Group and President and CEO, TD Bank, advised that "[w]e do expect to close the transaction at the end of the fiscal first quarter. And we're tracking well against that." Defendant Salom then added: "[O]n August 18th we had the public hearing, the OCC, the Fed hosted. That is the normal part of the application process. But to your point, I'm sure there's going to be a lot of questions about how confident are we? We're extremely confident. We believe this transaction does not represent any financial stability or competitive consolidation risk. We've already announced that we will protect all the front-line staff, we will be retaining all the retail and commercial bankers. Likewise, we won't be closing any stores. So, if you look at the strength of the application, we're quite excited about getting this done in short order.

Based on the repeated reassurances provided by Defendants Masrani and Salom that there were no regulatory risks that could delay the closing of the Transaction, FHN shareholders had no reason to believe that TD Bank was concealing any regulatory risks that could derail the Transaction. Unbeknownst to FHN shareholders, however, (i) TD Bank had materially deficient policies and procedures for detecting and reporting suspected money laundering, (ii) regulators at the Office of the Comptroller of the Currency ("OCC") and the Federal Reserve were refusing to approve the Transaction because of TD Bank's materially deficient AML policies and procedures, and (iii) TD Bank's materially deficient AML policies and procedures thus constituted a concealed regulatory risk to the closing of the Transaction.

TD Bank's public statements concerning its risk management practices in general, and AML compliance in particular, gave no indication that TD Bank's AML policies and procedures were materially deficient. To the contrary, an investor presentation made available by TD Bank to FHN shareholders on Schedule 14A on February 28, 2022, advised that TD Bank has "a disciplined risk culture." That "disciplined risk culture" was documented in part in TD Bank's Code of Conduct and Ethics for Employees and Directors ("TD Bank Code"), which was filed on Form 6-K with the SEC on February 7, 2022. With respect to AML compliance, the TD Bank Code stated:

TD is committed to taking all reasonable and appropriate steps to detect and deter persons engaged in money laundering from utilizing TD products or services to do so. Making the proceeds of criminal activity appear as if they came from legitimate sources is a criminal offence, and so is knowingly failing to report transactions or activities where it is suspected they relate to money laundering. We must not knowingly initiate or be party to money laundering and must promptly report suspected money laundering situations in accordance with the TD Bank Group Enterprise Anti-Money Laundering and Anti-Terrorist Financing Policy and the escalation procedures established for our business or region

Subsequently, in March 2022, TD Bank published its "TD Bank Statement on Anti-Money Laundering, Anti-Terrorist Financing and Sanctions" ("AML Statement"), which represented that TD Bank's commitment to detect and deter persons engaged in money laundering was formalized through "the establishment of an enterprise-wide Anti-Money Laundering/Anti-Terrorist Financing (AML/ATF) and Sanctions risk and compliance management program (Global AML Program) that is designed to detect and report suspected money laundering and terrorist financing and activity prohibited by sanctions." The AML Statement further represented that among the requirements of the Global AML Program were (i) "ongoing monitoring to detect and report suspicious transactions or activities," (ii) "regulatory reporting of prescribed transactions," and (iii) "independent testing of control effectiveness."

The first inkling that regulatory issues may derail approval of the Transaction surfaced on TD Bank's Q4 2022 earnings call on December 1, 2022. Defendant Masrani advised that TD Bank was "planning to close the [Transaction] in the first half of fiscal 2023 subject to customary closing conditions, including approvals from U.S. and Canadian regulatory authorities." After observing that Defendant Masrani had previously guided on the Q3 2022 earnings call that the Transaction would close in Q1 2023, and that the timing had now slipped to the first half of 2023, an analyst inquired "[w]hat's prompting the delayed expectation of closing?" Defendant Masrani responded, "so we don't control the timing of all the regulatory approvals, but we are confident that we will get closing within the time line that we've put out." When the analyst pressed for specifics—"are they taking a closer look at anything? Are you anticipating having to make any adjustments to your product going up or your schedule in advance of the close?"—Defendant Masrani advised, "No, I'm not aware of anything of the sort you're mentioning."

Yet, just over two months later, on February 9, 2023, the Companies issued a joint press release ("Feb 2023 Press Release") announcing that they had mutually agreed to extend the deadline to close the Transaction from February 27, 2023, to May 27, 2023. The Feb 2023 Press Release further stated that "[c]ustomary closing conditions, including approvals from regulatory authorities in the U.S. and Canada, are required to close the transaction." The generic disclosure, however, was insufficient to alert FHN shareholders to the existence of regulatory risks since it failed to disclose the specific risk that TD Bank's materially deficient AML policies and procedures were posing to regulatory approval of the Transaction.

On March 1, 2023, in its 2022 Form 10-K, FHN advised that (i) receipt of regulatory approval of the Transaction was taking longer than originally anticipated, (ii) TD Bank had recently informed FHN that TD Bank did not expect to receive the necessary regulatory approvals in time to close the Transaction by a new deadline of May 27, 2023, and (iii) TD Bank had initiated discussions with FHN regarding a potential further extension of the new May 27, 2023 deadline. The 2022 Form 10-K also noted that "TD cannot provide a new projected closing date at this time."

On this news, FHN's stock price fell $2.63 per share, or 10.62%, to close at $22.14 per share on May 1, 2023.

On May 3, 2023, according to a Capital Forum report being circulated among traders, Defendant Masrani had a meeting with officials of the OCC concerning the Transaction on March 9, 2023, that was also attended by TD Bank's outside counsel.

On this news, FHN's stock price fell $1.14 per share, or 7.04%, to close at $15.05 per share on May 3, 2023.

On May 4, 2023, before the markets opened, TD Bank and FHN announced that they had mutually agreed to terminate the Transaction because TD Bank "does not have a timetable for regulatory approvals to be obtained for reasons unrelated to First Horizon," and "there is uncertainty as to when and if these regulatory approvals can be obtained." TD Bank and FHN, however, failed to disclose that TD Bank's materially deficient AML policies and procedures had derailed regulatory approval of the Transaction.

Upon news of the termination of the Transaction, FHN's stock price fell $4.99 per share, or 33.16%, to close at $10.06 per share on May 4, 2023.

The concealed regulatory risk that derailed the Transaction was finally revealed on May 8, 2023, when The Wall Street Journal (the "WSJ") published an article citing sources alleging that TD Bank's "handling of suspicious customer transactions was behind regulators' refusal to bless" the Transaction, and that the Transaction was terminated because regulators were unwilling "to give TD a clean bill of health on its anti-money laundering practices." The article's sources alleged that "regulators' concerns stemmed from the way TD handled unusual transactions in recent years, and the speed at which some of them were brought to the attention of U.S. authorities." According to the WSJ, in "recent years," TD Bank had only "flagged 28 customer transactions" as suspicious. For these reasons, the OCC and the Federal Reserve refused to approve the Transaction within the necessary time frames.

Pomerantz LLP, with offices in New York, Chicago, Los Angeles, London, Paris, and Tel Aviv, is acknowledged as one of the premier firms in the areas of corporate, securities, and antitrust class litigation. Founded by the late Abraham L. Pomerantz, known as the dean of the class action bar, Pomerantz pioneered the field of securities class actions. Today, more than 85 years later, Pomerantz continues in the tradition he established, fighting for the rights of the victims of securities fraud, breaches of fiduciary duty, and corporate misconduct. The Firm has recovered billions of dollars in damages awards on behalf of class members. See www.pomlaw.com.

CONTACT:
Robert S. Willoughby
Pomerantz LLP
[email protected]
888-476-6529 ext. 7980

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