A brokerage and two of its registered representatives agreed to pay the SEC a little more than $1 million for violating Reg BI by churning client accounts, according to orders released Monday.
The Securities and Exchange Commission charged Richard Michalski and Michael Murray, two reps for Laidlaw & Co., with recommending an investment strategy to six retail customers from July 2020 through October 2021 that resulted in excessive trading. The SEC said the two failed to comply with the Regulation Best Interest care obligation because the strategy did more to generate revenue for them than returns for the customer. They also failed to consider whether the strategy was appropriate given the customers’ appetite for risk and investment objectives.
“The strategy involved frequent in-and-out trades that placed the broker’s interest in generating commissions and fees ahead of the customers’ interest in making a profit,” the SEC states in the order. “With respect to one customer, the trading also was excessive in light of the customer’s investment profile. As to the other customers, the fact that their investment profiles reflected a higher tolerance for risk and/or active trading did not relieve respondents of their care obligation with respect to the recommendations they made.”
The SEC charged Laidlaw with failing to implement policies and procedures to supervise its brokers to ensure compliance with Reg BI, according to a separate order. It also made similar charges against Laidlaw for a “pre-Reg BI period” from December 2016 through December 2018, when similar excessive trading occurred.
Michalski agreed to pay $137,289 in disgorgement, prejudgment interest and a civil penalty. Murray agreed to pay $40,558. The firm must pay $822,884 in disgorgement and penalties.
A spokesperson for Laidlaw was not immediately available for comment. Laidlaw is based in London. Michalski and Murray worked out of the firm’s New York City branch.
Reg BI, the broker standard of conduct, went into force in June 2020. Under the regulation, brokers cannot put their interests ahead of their customers’ interests when recommending investment products or strategies. After a transition period of a couple of years, the SEC has been stepping up enforcement of Reg BI.
The Illinois order refers to Brandon Ellington’s investment program as a “Ponzi-like scheme.”
But the Amazon executive chair seems to want it both ways, arguing that taxing the ultra-wealthy won't help struggling Americans.
Northern Trust planning leader sees the bill extending qualified charitable distributions to employer plans as a potential positive step — but advisors shouldn't overlook bigger holes in the strategy.
Markets will always create reasons for investors to worry. The advisor’s role is not to predict uncertainty, but to help clients understand why volatility should not derail a well-built financial plan.
Plus, Asset-Map partners with Contio to elevate the advisor meeting experience, and MyVest claims an innovation in portfolio management with separately managed models.
As technical expertise becomes increasingly commoditized, advisors who can integrate strategy, relationships, and specialized expertise into a cohesive client experience will define the next era of wealth management
Growth may get the headlines, but in my experience, longevity is earned through structure, culture, and discipline
