DOB: Laidlaw and Co UK - Consent Order

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IN THE MATTER OF:

LAIDLAW & COMPANY (UK) LTD.,
f/k/a SANDS BROTHERS
INTERNATIONAL LTD.

CRD NO. 119037

    ("Laidlaw")

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CONSENT ORDER

DOCKET NO. RCF-2007-7093-S

PRELIMINARY STATEMENT

WHEREAS, the Banking Commissioner (“Commissioner”) is charged with the administration of Chapter 672a of the Connecticut General Statutes, the Connecticut Uniform Securities Act (“Act”), and Sections 36b-31-2 et seq. of the Regulations of Connecticut State Agencies promulgated under the Act (“Regulations”);

WHEREAS, the Commissioner, through the Securities and Business Investments Division (“Division”) of the Department of Banking (“Department”), conducted an investigation pursuant to Section 36b-26(a) of the Act into the activities of Laidlaw to determine whether it had violated, was violating or was about to violate any provisions of the Act or Regulations (“Investigation”);

WHEREAS, on November 29, 2004, Sands Brothers Asset Management LLC (CRD No. 110076) (“Sands Brothers”), Martin Scott Sands (CRD No. 1186904) (“Sands”), a registered broker-dealer agent of Laidlaw, and Laidlaw entered into a consent order with the Commissioner (“2004 Consent Order”), pursuant to Section 36b-15(a) of the Act, conditioning the registration of Sands as an investment adviser agent of Sands Brothers and restricting his securities-related activities;

WHEREAS, as one of the conditions ordered by the Commissioner in the 2004 Consent Order, Laidlaw was required to, inter alia, “notify the Division Director in writing each calendar quarter of any securities-related complaints, actions or proceedings (including arbitrations and updates thereto) involving Sands which occur during the quarter, including the disposition thereof. Such report shall be provided no later than ten business days following the close of the quarter and shall include any written reprimands, censures or warnings issued by . . . [Laidlaw] to Sands.  If no complaints, actions, proceedings, firm actions or updates exist for the quarter, the report shall so indicate.  The first report shall cover the quarter ending December 31, 2004, and the final report shall cover the quarter ending December 31, 2006”;

WHEREAS, as a result of the Investigation, the Division alleges that Laidlaw:  (1)  Failed to disclose an October 1, 2004, claim for arbitration filed against Sands with the National Association of Securities Dealers (“NASD”) in the quarterly report filed with the Division for the quarter ending December 31, 2004; (2) failed to disclose a May 16, 2005, Consent Order of Withdrawal issued against Sands by the State of Illinois, Secretary of State, Securities Department, in the quarterly report filed with the Division for the quarter ending June 30, 2005; and (3) failed to disclose a February 1, 2006, Settlement Agreement and Release of the NASD arbitration claim in the quarterly report filed with the Division for the quarter ending March 31, 2006;

WHEREAS, as a result of the Investigation, the Division alleges that Laidlaw, in violation of Section 36a-23 of the Act, filed quarterly reports with the Commissioner which were, at the time and in the light of the circumstances under which they were made, false or misleading in any material respect and omitting to state a material fact;

WHEREAS, on May 18, 2007, the Commissioner, acting pursuant to Sections 36b-27(a), 36b 15(a), 36b-27(d) and 4-182(c) of the Connecticut General Statutes, issued an Order to Cease and Desist, Notice of Intent to Revoke Registration as Broker-Dealer, Notice of Intent to Fine and Notice of Right to Hearing (“Order”) against Laidlaw and others;

WHEREAS, the Order stated that the Commissioner had ordered Laidlaw to cease and desist from violating the Consent Order and Section 36b-23 of the Act; that he intended to revoke the registration of Laidlaw; and that he intended to impose a fine against Laidlaw; that a hearing would be held on July 17, 2007, on the matters alleged in the Order (“Hearing”); and that, if Laidlaw failed to appear at such hearing, the Commissioner may order that a maximum fine of Four Hundred Thousand Dollars ($400,000) be imposed upon Laidlaw;

WHEREAS, Laidlaw requested a hearing on the matters alleged in the Order;

WHEREAS, Laidlaw and the Division requested continuances of the Hearing;

WHEREAS, the Hearing is currently scheduled for February 5, 2009;

WHEREAS, Section 36b-31(a) of the Act provides, in relevant part, that “[t]he commissioner may from time to time make . . . such . . . orders as are necessary to carry out the provisions of sections 36b-2 to 36b-33, inclusive”;

WHEREAS, Section 36b-27(f) of the Act provides, in relevant part, that “[a]ny time after the issuance of . . . [a] notice provided for in . . . subdivision (1) of subsection (d) of this section, the commissioner may accept an agreement by any respondent named in such . . . notice to enter into a written consent order in lieu of an adjudicative hearing”;

WHEREAS, Section 4-177(c) of the Connecticut General Statutes and Section 36a-1-55(a) of the Regulations of Connecticut State Agencies provide that a contested case may be resolved by consent order, unless precluded by law”;

WHEREAS, Laidlaw recognizes the necessity for full compliance with the provisions of the Act and Regulations, including, without limitation, the timely filing with the Department of Regulation D offerings offered in Connecticut;

WHEREAS, Laidlaw has implemented a new Supervisory Procedures Manual and adopted a new regimen and compliance organization, including the hiring of a new Chief Compliance Officer;

WHEREAS, Laidlaw and the Commissioner now desire to resolve the matters alleged in the Order and agree to the language in this Consent Order;

WHEREAS, Laidlaw agrees that the Order may be used in construing the terms of this Consent Order and agrees to the language in this Consent Order.

CONSENT TO WAIVER OF PROCEDURAL RIGHTS

WHEREAS, Laidlaw, through its execution of this Consent Order, voluntarily waives the following rights:

1.
To be afforded an opportunity for a hearing within the meaning of Sections 36b-15(f) and 36b 27(d)(2) of the 2008 Supplement to the General Statutes, and Section 4-177(a) of the Connecticut General Statutes;
    
2.
To present evidence and argument and to otherwise avail itself of Sections 36b-15(f) and 36b 27(d)(2) of the 2008 Supplement to the General Statutes, and Section 4-177c(a) of the Connecticut General Statutes;
    
3. To present its position in a hearing in which it is represented by counsel;
    
4. To have a written record of the hearing made and a written decision issued by a hearing officer; and
    
5. To seek judicial review of, or otherwise challenge or contest the matters described herein, including the validity of this Consent Order.

ACKNOWLEDGEMENT OF THE COMMISSIONER’S ALLEGATIONS

WHEREAS, Laidlaw, through its execution of this Consent Order, acknowledges that the Commissioner has made the following allegations, without admitting or denying them:

1.
The entry of this Consent Order is necessary or appropriate in the public interest or for the protection of investors and consistent with the purposes fairly intended by the policy and provisions of the Act;
   
2.
Laidlaw violated the 2004 Consent Order by failing to disclose:  (a) an October 1, 2004, claim for arbitration filed against Sands with the NASD in the quarterly report filed with the Division for the quarter ending December 31, 2004; (b) a May 16, 2005, Consent Order of Withdrawal issued against Sands by the State of Illinois, Secretary of State, Securities Department, in the quarterly report filed with the Division for the quarter ending June 30, 2005; and (3) a February 1, 2006, Settlement Agreement and Release of the NASD arbitration claim in the quarterly report filed with the Division for the quarter ending March 31, 2006, which are bases for an order to cease and desist pursuant to Section 36b-27(a) of the 2008 Supplement to the General Statutes, an order imposing fine pursuant to Section 36b-27(d) of the 2008 Supplement to the General Statutes, and an order revoking Laidlaw’s registration as a broker-dealer in Connecticut pursuant to Section 36b-15(a) of the 2008 Supplement to the General Statutes; and
   
3.
Laidlaw violated Section 36b-23 of the Act by filing documents with the Commissioner which were, at the time and in the light of the circumstances under which they were made, false or misleading in any material respect and omitting to state a material fact, which form the basis for an order to cease and desist pursuant to Section 36b-27(a) of the 2008 Supplement to the General Statutes, an order imposing fine pursuant to Section 36b-27(d) of the 2008 Supplement to the General Statutes against Laidlaw, and an order revoking Laidlaw’s registration as a broker-dealer in Connecticut pursuant to Section 36b-15(a) of the 2008 Supplement to the General Statutes.

WHEREAS, if proven, the Commissioner would have the authority to enter findings after granting Laidlaw an opportunity for a hearing;

WHEREAS, Laidlaw voluntarily agrees to consent to the entry of the sanctions described below.

CONSENT TO ENTRY OF SANCTIONS

WHEREAS, Laidlaw, through its execution of this Consent Order, consents to the Commissioner’s entry of a Consent Order imposing on it the following sanctions:

1.
Laidlaw shall cease and desist from violating the Act, Regulations and orders thereunder, including but not limited to, Section 36b-23 of the Act and the 2004 Consent Order;
2.
Laidlaw shall:
   
(a)
No later than the date of the issuance of this Consent Order, designate and retain an independent consultant(s) (“Consultant”) sufficiently experienced in securities regulatory, supervisory and compliance issues, specifically knowledgeable with the Act and the Regulations, and not unacceptable to the Division, to conduct an initial written review (“Initial Review”), and four semi-annual written reviews (“Semi-annual Review”).  The Initial Review shall examine Laidlaw’s supervisory and compliance policies and procedures and compliance employee staffing and experience levels, and make recommendations to ensure that Laidlaw’s supervisory and compliance procedures safeguard against violations of the Act and the Regulations and that all compliance employee staffing and experience levels are adequate.  Each Semi-annual Review shall examine Laidlaw’s ongoing compliance with the recommendations made in the Initial Review and shall include a written report to the Division Director, signed and attested to by the Chief Executive Officer, disclosing any securities-related complaints, actions or proceedings (including arbitrations and updates thereto) which occur during the relevant six (6) month time period, including the disposition thereof.  If no complaints, actions, proceedings, firm actions or updates exist for the relevant time period, the report shall so indicate;
   
(b) Within ninety (90) days of the issuance of this Consent Order, submit a copy of the Initial Review detailing the findings of the Consultant’s review and recommendations and a separate written report indicating the steps that have been taken to implement those recommendations with the Division Director;
   
(c) Beginning six (6) months after the submission of the Initial Review and continuing every six (6) months for a total of two (2) years, submit a copy of the Semi-annual Review with the Division Director indicating the findings of the Consultant’s review for the relevant six (6) month time period and a separate written report indicating the steps that have been taken to address those findings;
   
(d) In the event that a determination be made at any time not to implement any particular recommendation(s) made by the Consultant, provide a written explanation to the Division Director indicating the reason(s) for not implementing such recommendation(s);
   
(e) In the event that the Consultant is terminated or ceases working for Laidlaw prior to the submission of the final Semi-annual Review, Laidlaw shall immediately notify the Division Director.  In a timely fashion thereafter, Laidlaw shall retain a new Consultant sufficiently experienced in securities regulatory, supervisory and compliance issues, specifically knowledgeable with the Act and the Regulations, and not unacceptable to the Division;
 
3.
No later than the date this Consent Order is issued by the Commissioner, Laidlaw shall remit to the Department of Banking, by cashier’s or certified check made payable to “Treasurer, State of Connecticut”, the sum of Sixty Thousand Dollars ($60,000) representing an administrative fine of Fifty Thousand Dollars ($50,000), and investigative costs of Ten Thousand Dollars ($10,000);

WHEREAS, Hugh Regan, through his signature, is CEO of Laidlaw and its sole Director and has corporate authority to direct the affairs of Laidlaw and recognizes that as CEO and sole Director through his designees, including without limitation, the firm’s Chief Compliance Officer, he bears the responsibility to ensure that Laidlaw’s practices conform to standards acceptable for a Connecticut registered broker-dealer;

AND WHEREAS, Laidlaw specifically assures the Commissioner that none of the violations alleged herein shall occur in the future.

CONSENT ORDER

 NOW THEREFORE, the Commissioner enters the following:

1.
The Sanctions set forth above be and are hereby entered;
   
2.
Entry of this Consent Order by the Commissioner is without prejudice to the right of the Commissioner to take enforcement action against Laidlaw based upon a violation of this Consent Order or the matters underlying its entry, if the Commissioner determines that compliance with the terms herein is not being observed or if any representations made by Laidlaw and reflected herein are subsequently discovered to be untrue; and
   
3.
This Consent Order shall become final when issued.

Issued at Hartford, Connecticut
this 20th day of January 2009.            ________/s/_________
                                                    Howard F. Pitkin
                                                    Banking Commissioner



CONSENT TO ENTRY OF ORDER

I, Hugh Regan, state on behalf of Laidlaw & Company (UK) Ltd., f/k/a Sands Brothers International Ltd., that I have read the foregoing Consent Order; that I know and fully understand its contents; that I am authorized to execute this Consent Order on behalf of Laidlaw & Company (UK) Ltd., f/k/a Sands Brothers International Ltd.; that Laidlaw & Company (UK) Ltd., f/k/a Sands Brothers International Ltd., agrees freely and without threat or coercion of any kind to comply with the terms and conditions stated herein; and that Laidlaw & Company (UK) Ltd., f/k/a Sands Brothers International Ltd., consents to the issuance of this Consent Order, expressly waiving any right to a hearing on the matters described herein.

                                                   
 By:  ________/s/_________
       Name:  Hugh Regan
       Title:  CEO
       Laidlaw & Company (UK) Ltd.
       f/k/a Sands Brothers International Ltd.

 

State of:  New York

County of:  New York

On this the 31st day of December, before me, a notary public, the undersigned officer, personally appeared Hugh Regan, who acknowledged himself/herself to be the CEO of Laidlaw & Company (UK) Ltd., f/k/a Sands Brothers International Ltd., a limited liability company, and that he/she, as such CEO, being authorized so to do, executed the foregoing instrument for the purposes therein contained, by signing the name of the limited liability company by himself/herself as CEO.

In witness whereof I hereunto set my hand.


________/s/______________________________
Notary Public/Commissioner of the Superior Court
Date Commission Expires:  March 30, 2009


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