The Securities and Exchange Commission (SEC) settled charges with Laidlaw & Co., along with two representatives, who were accused of violating Regulation Best Interest (BI) rules by recommending multiple trades to boost commissions.
The U.K.- based Laidlaw and Company, a registered broker-dealer, and two of its registered representatives, were charged for “recommending frequent in-and-out trades that placed the broker’s interest in generating commissions and fees ahead of the customer’s interest in making a profit,” the SEC said in a release announcing the settlement.
According to the SEC, from July 2020 through October 21, Richard Michalski and Michael Murray made a series of recommendations to retail customers without a reasonable basis to believe that the recommended transactions were not excessive and were in their customers’ best interests.
However, Michalski and Murray, along with Laidlaw, did not consider the costs associated with such a high frequency in trading, nor did they understand that customers would need to achieve high returns to break even from the costs, said the SEC.
Additionally, the SEC accused Laidlaw of failing to maintain or enforce policies designed to address and prevent violations of Regulation Best Interest. According to the agency, the wealth manager had procedures that did not provide sufficient guidance to supervisors and no methods of ensuring that they were taking action to remedy violative conduct.
The SEC further alleges that from December 2016 through December 2018, Laidlaw did not prevent a related scheme from two other registered representatives who recommended high-cost strategies without a reasonable basis.
Laidlaw had neither admitted or denied the accusations, but agreed to pay $547,712.36 in disgorgement, $51,844.22 in prejudgment interest, and a civil monetary penalty of $223,328.
Michalski agreed to pay disgorgement of $88,506, prejudgment interest of $4,260.55, and a civil monetary penalty of $44,253; and will be suspended from associating with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization for six months.
Murray further agreed to pay disgorgement of $24,414.17, prejudgment interest of $1,143.91, and a civil monetary penalty of $20,000.
SEE ALSO:
- FINRA Shuts Down B-D for Reg BI Breaches, Additional Violations
- SEC Publishes Final Guidance on Reg BI
- SEC Risk Alert Identifies Reg BI Compliance Issues
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.