Laidlaw Company (UK) LTD. is a brokerage firm headquartered in London England that has been censured and fined $25,000.00 by Financial Industry Regulatory Authority (FINRA) founded on allegations that it failed to supervise recommendations of inverse and leveraged exchange traded funds to make sure that those recommendations complied with FINRA and NASD Rules. Letter of Acceptance Waiver and Consent No. 2015043362701 (Mar. 15, 2018).
According to the AWC, between April of 2013 and December of 2015, representatives of the firm had solicited eight hundred sixty-nine purchases and nine hundred forty six non-traditional exchange traded fund transactions in three hundred twelve accounts owned by the firm’s customers. The AWC stated that those transactions collectively contained a $32,000,000.00 principal value.
The AWC revealed that throughout that period, no supervision system was utilized by the firm that was adequately designed to allow non-traditional exchange traded fund transactions to be reviewed by supervisory personnel. The AWC stated that supervisors were not required by the written supervisory procedures to conduct reviews of customers’ non-traditional exchange traded fund positions when those positions had been maintained for prolonged periods or otherwise caused customers to incur unrealized losses.
The firm’s written supervisory procedures were reportedly void of any product-specific limitations concerning the ability of the stockbrokers to make recommendations of non-traditional exchange traded funds. The AWC further detailed that the firm also relied upon an exception report to be utilized in reference to exchange traded fund transactions, but those exception reports never displayed how long investors held their positions in the products. FINRA found that the firm’s supervisory failures were violative of FINRA Rules 2010, 3110 and NASD Rule 3010.
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