Registered broker-dealer Laidlaw and Company agreed to pay more than $800,000 as part of a settlement with the Securities and Exchange Commission (SEC) addressing multiple alleged violations of Regulation Best Interest (Reg BI).
Laidlaw, which is based in the United Kingdom, with offices in the United States, was fined approximately $223,000 and agreed to pay about $548,000 in disgorgement and $52,000 in prejudgment interest, the SEC announced in an administrative proceeding Monday. The firm was faulted for running afoul of Reg BI’s care and compliance obligations.
Two registered representatives at the firm, Richard Michalski and Michael Murray, also agreed to settlements with the SEC alleging violations of Reg BI. Michalski agreed to pay more than $100,000 in penalties, disgorgement, and interest, while Murray’s total payments fell short of $50,000.
The details: From July 2020 through October 2021, Laidlaw, Michalski, and Murray violated the care obligation of Reg BI through a series of recommendations to four retail customers that weren’t consistent with their investment profiles and did not place their interests foremost, according to the SEC’s order.
“Laidlaw, Michalski, and Murray failed to consider the impact of the costs generated by the frequency of the trading, and the level of costs associated with the trading meant that the customers in question needed to achieve high returns in order to break even,” the SEC said in its release.
Compliance considerations: The SEC accused Laidlaw of failing to maintain and enforce policies to address and prevent violations of Reg BI, in line with the rule’s compliance obligation.
The agency also alleged Laidlaw, from December 2016 through December 2018, did not reasonably supervise two other representatives who violated the Securities Exchange Act by recommending frequent in-and-out trades to customers not determined to be suitable for such activities.
Laidlaw didn’t respond to a request for comment. The firm, Michalski, and Murray neither admitted nor denied the SEC’s findings in reaching settlement.