The action is based upon the defendants’ allegedly false and misleading statements and omissions of material facts concerning TD Bank’s ability to timely close a business combination with First Horizon — a combination that was ultimately abandoned. Specifically, the complaint alleges that defendants failed to disclose that TD Bank had deficient internal controls that posed a significant risk to the closing of the First Horizon transaction. TD Bank allegedly suffered from grossly ineffective internal controls regarding anti-money-laundering practices and failed to appropriately report unusual transactions or suspicious activity to U.S. regulators. Indeed, according to a report published by The Wall Street Journal, in “recent years,” TD Bank only “flagged 28 customer transactions” as suspicious. As a result, the Office of the Comptroller of the Currency and the U.S. Federal Reserve refused to approve the business combination within the necessary time frames.
On March 1, 2023, First Horizon revealed that TD Bank had informed First Horizon that it did not expect “the necessary regulatory approvals will be received in time to complete the [business combination] by May 27, 2023.” On this news, the price of First Horizon shares fell 10.6% to close at $22.14 per share on March 1, 2023.
Thereafter, on May 4, 2023, First Horizon and TD Bank issued a joint press release titled “TD Bank and First Horizon Mutually Agree to Terminate Merger Agreement,” explaining that “TD informed First Horizon that TD does not have a timetable for regulatory approvals to be obtained for reasons unrelated to First Horizon.” During a First Horizon investor call held that day, First Horizon further revealed that TD Bank “could not provide assurance of regulatory approval in 2023 or 2024.” On this news, First Horizon’s share price fell another 33%, to close at $10.06 per share on May 4, 2023.