FINRA has fined and censured Laidlaw & Company (UK) Ltd. (“Laidlaw”) over the firm’s supervisory system, which according to the regulator, was not reasonably designed to achieve compliance with federal securities laws and FINRA rules prohibiting market manipulation. As a result, Laidlaw was fined $1.5 million.
Additionally, the firm’s Chief Compliance Officer (“CCO”) was suspended from association with any FINRA member firm in any principal capacity for two months. He received a $15,000 fine.
Laidlaw also consented to provide a certification that the firm has enhanced its supervisory system and written supervisory procedures in ways that are reasonably expected to address the areas of conduct outlined by FINRA. Laidlaw must provide the certification to FINRA within 60 days.
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FINRA Letter of Acceptance, Waiver, and Consent No. 2016049087201
Laidlaw, the firm’s CCO, and FINRA entered into a Letter of Acceptance, Waiver, and Consent (“AWC”) on July 15, 2021.
According to the AWC, from at least January 2015 through September 2015, Laidlaw failed to establish, maintain, and enforce a supervisory system, including written supervisory procedures, reasonably designed to achieve compliance with federal securities laws and FINRA rules prohibiting market manipulation. Specifically, FINRA outlined the following supervisory failures:
- The firm did not provide branch managers with reasonable training or guidance regarding how to identify prohibited transactions.
- The firm did not provide branch managers with training or guidance about how the timing, pricing, and circumstances surrounding matched trades should be identified or considered.
- The firm did not explain how branch managers should review for patterns of potentially manipulative trading over time.
- The firm did not provide branch managers with any tools for detecting potential market manipulation.
- The firm did not have any exception reports or other electronic surveillance designed to detect potential matched trades, cross trades, or other forms of potential market manipulation, such as marking the close. “Marking the close” is the execution of transactions in a security at or near the end of the trading day in order to affect the security’s closing price. Branch managers’ manual review of orders was not reasonably designed to detect potential market manipulation given the sheer volume of trading.
- The branch managers’ daily review of blotter activity also was not reasonably designed to detect and prevent manipulation that spanned multiple days.
- The branch managers were only tasked with reviewing daily trade activity in their respective branches, and no one at Laidlaw was tasked with reviewing trades for potential manipulative activity across the firm’s branches.
Laidlaw also failed to detect numerous red flags of potential market manipulation involving shares of Company X, an investment banking client of the firm, whose shares did not trade on a national exchange. Although Laidlaw customers accounted for a substantial percentage of the daily trading volume on numerous days, Laidlaw did not detect—and, therefore, did not review or investigate—multiple occasions when Laidlaw representatives effected cross trades in Company X shares across Laidlaw customers’ accounts. Similarly, during the relevant period, Laidlaw failed to detect instances of potential marking the close, including multiple occasions when orders to purchase Company X stock were entered, either in the accounts of Laidlaw customers or Laidlaw representatives, within the last ten minutes of the trading day at prices at or above the previous trading price.
During at least the same period, Laidlaw and the firm’s CCO failed to preserve and maintain certain books and records required by Section 17(a) of the Exchange Act and Exchange Act Rule 17a-4. Specifically, Laidlaw and its CCO failed to maintain numerous business-related text messages exchanged between firm personnel and customers. Laidlaw personnel, including the firm’s CCO, routinely communicated with each other and with customers regarding firm business by text message using their personal mobile phones. Laidlaw’s CCO was aware that individuals he supervised also engaged in this practice. Laidlaw personnel, including the firm’s CCO and the individuals he supervised, did not send these text messages to their supervisors or the firm’s compliance department to be reviewed and retained, and the firm did not otherwise retain these business-related electronic communications.
Laidlaw & Company (UK) Ltd.
Laidlaw operates a full-service brokerage business and has been a FINRA member since July 2002.
On February 7, 2012, FINRA accepted AWC No. 2009016306101, by which the firm consented to a censure and $65,000 fine for multiple violations, including for violations of NASD Rule 3010(b) and FINRA Rule 2010 occurring from January 1, 2009, to June 21, 2009. Specifically, the firm failed to establish, maintain, and enforce written supervisory procedures relating to the retention of business-related emails sent by its representatives from a Bloomberg terminal.
On November 2, 2009, FINRA accepted AWC No. 2007007315501 by which the firm consented to a censure and $65,000 fine for multiple violations, including for violations of Section 17 of the Securities Exchange Act of 1934 (Exchange Act) and Exchange Act Rule 17a-4 and NASD Rules 3110, 3010(d), and 2110, occurring between June 1, 2006, and August 2, 2006. Specifically, the firm failed to retain business-related emails sent to and from non-Laidlaw email accounts used by Laidlaw representatives and failed to establish a system for supervisory review of those emails.
Laidlaw’s principal office is in London, England. The firm has eight branches with 88 registered representatives.
How to Recover Losses or Obtain a Free Consultation
If you have lost money with Laidlaw & Company (UK) Ltd., contact New York securities arbitration lawyer Jorge Altamirano of Iorio Altamirano LLP at email@example.com or toll-free at (855) 430-4010 for a free and confidential evaluation of your account.
Iorio Altamirano LLP is a securities arbitration law firm based in New York, NY. We pursue FINRA arbitration claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by financial advisors and brokerage firms.