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IN THE MATTER OF: LAIDLAW & COMPANY (UK) LTD. SANDS BROTHERS ASSET |
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ORDER TO CEASE AND DESIST NOTICE OF INTENT TO REVOKE NOTICE OF INTENT TO FINE AND NOTICE OF RIGHT TO HEARING DOCKET NO. RCF-2007-7093-S |
I. PRELIMINARY STATEMENT
| 1. | The Banking Commissioner (“Commissioner”) is charged with the administration of Chapter 672a of the Connecticut General Statutes, the Connecticut Uniform Securities Act (“Act”), and the regulations promulgated thereunder (Sections 36b-31-2 to 36b-31-33, inclusive, of the Regulations of Connecticut State Agencies) (“Regulations”). |
| 2. |
Pursuant to Section 36b-26(a) of the Act, the Commissioner, through the Securities and Business Investments Division (“Division”) of the Department of Banking, has conducted an investigation into the activities of Respondents to determine if they have violated, are violating or are about to violate provisions of the Act or Regulations. Section 36b-26(a) of the Act, provides, in pertinent part:
The commissioner may, subject to the provisions of the Freedom of Information Act, . . . (1) [m]ake such public or private investigations within or outside of this state as the commissioner deems necessary to determine whether any person has violated, is violating or is about to violate any provision of sections 36b-2 to 36b-33, inclusive, or any regulation or order thereunder . . . . |
| 3. | As a result of the investigation by the Division, the Commissioner has reason to believe that Respondents have violated certain provisions of the Act. |
| 4. |
As a result of the investigation by the Division, the Commissioner has the authority to issue a cease and desist order against Respondents pursuant to Section 36b-27(a) of the Act, which provides, in pertinent part:
Whenever it appears to the commissioner after an investigation that any person has violated, is violating or is about to violate any of the provisions of sections 36b-2 to 36b-33, inclusive, or any . . . order . . . issued under said sections, . . . the commissioner may, in the commissioner’s discretion, order (1) the person . . . to cease and desist from the violations . . . of the provisions of said sections or of the . . . orders thereunder . . . . After such an order is issued, the person named in the order may, within fourteen days after receipt of the order, file a written request for a hearing. Any such hearing shall be held in accordance with the provisions of chapter 54. |
| 5. |
As a result of the investigation by the Division, the Commissioner brings this administrative action pursuant to Section 36b-15(a) of the Act and Section 4-182(c) of the Connecticut General Statutes to revoke the broker-dealer registration of Laidlaw, as set forth herein. Section 36b-15(a) of the Act provides, in pertinent part:
The commissioner may, by order, . . . revoke any registration . . . if the commissioner finds that (1) the order is in the public interest, and (2) the . . . registrant . . . (B) has wilfully violated or wilfully failed to comply with any provision of sections 36b-2 to 36b-33, inclusive, . . . or any . . . order . . . under said sections . . . . Section 4-182(c) of the Connecticut General Statutes provides, in pertinent part:
No revocation . . . of any license is lawful unless, prior to the institution of agency proceedings, the agency gave notice by mail to the licensee of facts or conduct which warrant the intended action, and the licensee was given an opportunity to show compliance with all lawful requirements for the retention of the license. |
| 6. |
As a result of the investigation by the Division, the Commissioner has the authority to impose a fine on Respondents pursuant to Section 36b-27(d) of the Act, which provides, in pertinent part:
(1) Whenever the commissioner finds as the result of an investigation that any person has violated any of the provisions of sections 36b-2 to 36b-33, inclusive, or any . . . order . . . issued under said sections, the commissioner may send a notice to (A) such person . . . by registered mail, return receipt requested . . . . Any such notice shall include: (i) A reference to the title, chapter . . . or order alleged to have been violated; (ii) a short and plain statement of the matter asserted or charged; (iii) the maximum fine that may be imposed for such violation; and (iv) the time and place for the hearing. Any such hearing shall be fixed for a date not earlier than fourteen days after the notice is mailed.
(2) The commissioner shall hold a hearing upon the charges made unless such person fails to appear at the hearing. Any such hearing shall be held in accordance with the provisions of chapter 54. After the hearing if the commissioner finds that the person has violated . . . any of the provisions of sections 36b-2 to 36b-33, inclusive, or any . . . order . . . issued under said sections, the commissioner may, in the commissioner’s discretion and in addition to any other remedy authorized by said sections, order that a fine not exceeding one hundred thousand dollars per violation be imposed upon such person. If such person fails to appear at the hearing, the commissioner may, as the facts require, order that a fine not exceeding one hundred thousand dollars per violation be imposed upon such person. The commissioner shall send a copy of any order issued pursuant to this subsection by registered mail, return receipt requested, . . . to any person named in such order. |
II. RESPONDENT
| 7. | Laidlaw is a foreign limited liability company with its main office located at 35 Dover Street, London, England W1S 4NQ. |
| 8. |
Sands Brothers is a limited liability company with its principal place of business at 90 Park Avenue, 39th Floor, New York, New York 10016.
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III. STATEMENT OF FACTS
| 9. | From at least February 2003 to the present, Laidlaw has been registered in Connecticut under the Act as a broker-dealer. |
| 10. | From at least July 1998 to the present, Sands Brothers has been registered with the Securities and Exchange Commission as an investment adviser. |
| 11. | On October 1, 2004, Martin Scott Sands (CRD No. 1186904) (“Sands”), a registered broker-dealer agent of Laidlaw, applied for registration as an investment adviser agent of Sands Brothers. |
| 12. | The Commissioner, through the Division, conducted an investigation of Sands pursuant to Sections 36b-8 and 36b-26(a) of the Act. |
| 13. | As a result of the investigation, the Commissioner determined that in October 2000, inter alia, Sands had been censured, fined and suspended for three months from all supervisory positions and responsibilities by the New York Stock Exchange, and that in December 2003, inter alia, Sands had been censured, fined and barred from membership for four months by the New York Stock Exchange. |
| 14. | On November 29, 2004, as a condition to the continued registration of Sands as a broker-dealer agent in this state and as a condition to the registration of Sands as an investment adviser agent under the Act, Sands, Laidlaw and Sands Brothers entered into a consent order with the Commissioner (“Consent Order”), issued pursuant to Section 36b-15(a) of the Act, conditioning the registration of Sands as an investment adviser agent and restricting his securities-related activities. |
| 15. | As one of the conditions ordered by the Commissioner in the Consent Order, Respondents, inter alia, were required to “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 . . . [Respondents] 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”. |
| 16. | On September 8, 2004, the State of Illinois, Secretary of State, Securities Department initiated an action against Sands. On May 16, 2005, Sands was the subject of a Consent Order of Withdrawal issued by the State of Illinois, Secretary of State, Securities Department (“Withdrawal”). |
| 17. | On July 11, 2005, the Division received from Respondents the quarterly report required by the Consent Order for the quarter that ended June 30, 2005. The quarterly report stated that “. . . [Sands] has not been the subject of any new legal matters including customer complaints, arbitrations or regulatory actions for the quarter ending June 30, 2005”. The quarterly report failed to disclose the Withdrawal against Sands. |
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| 19. | On May 27, 2005, the Division received the quarterly report required by the Consent Order from Respondents for the quarter that ended December 31, 2004. The quarterly report stated that “[d]uring the fourth quarter of 2004, (October 1, 2004 to December 31, 2004) . . . [Sands] was not the subject of any customer complaints, or arbitrations”. The quarterly report failed to disclose the Arbitration. |
| 20. | On February 1, 2006, Sands entered into a general Settlement Agreement and Release of the claim filed for arbitration (“Settlement”). |
| 21. | On April 6, 2006, the Division received the quarterly report required by the Consent Order from Respondents for the quarter that ended March 31, 2006. The quarterly report stated that “. . . [Sands] has not been the subject of any new legal matters including customer complaints, arbitrations or regulatory actions for the quarter ending March 31, 2006”. The quarterly report failed to disclose the Settlement. |
| 22. |
On September 21, 2006, the Commissioner gave Laidlaw written notice pursuant to Section 4-182(c) of the Connecticut General Statutes that it may have engaged in conduct which would constitute a basis for the revocation of its broker-dealer registration in Connecticut and gave Laidlaw the opportunity to show compliance with all lawful requirements for the retention of its broker-dealer registration in Connecticut. To date, Laidlaw has failed to respond to the September 21, 2006 notice.
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IV. STATUTORY BASIS FOR ORDER TO CEASE AND DESIST AGAINST RESPONDENTS, REVOCATION OF REGISTRATION AS BROKER-DEALER
AGAINST LAIDLAW AND ORDER IMPOSING FINE AGAINST RESPONDENTS
a. Wilful Violation of a Consent Order
| 23. | Paragraphs 1 through 22, inclusive, are incorporated and made a part hereof as if more fully set forth herein. |
| 24. | Laidlaw’s failure to report to the Division, as required by the Consent Order, the Withdrawal, Arbitration and Settlement brought against Sands, as more fully described in paragraphs 16 through 21, inclusive, constitutes a wilful violation of the Consent Order, and such wilful violation forms a basis for an order to cease and desist to be issued against Laidlaw pursuant to Section 36b-27(a) of the Act, the revocation of Laidlaw’s registration as a broker-dealer in Connecticut pursuant to Section 36b-15(a)(2)(B), and the imposition of a fine against Laidlaw pursuant to Section 36b-27(d) of the Act. |
| 25. |
Sands Brothers’ failure to report to the Division the Withdrawal, Arbitration and Settlement brought against Sands, as more fully described in paragraphs 16 through 21, inclusive, constitutes a wilful violation of the Consent Order, and such wilful violation forms a basis for an order to cease and desist to be issued against Sands Brothers pursuant to Section 36b-27(a) of the Act, and the imposition of a fine against Sands Brothers pursuant to Section 36b-27(d) of the Act.
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b. Wilful Violation of Section 36b-23 of the Act –
Making a Statement Which is False or Misleading in any Material Respect
and Omitting to State a Material Fact to the Commissioner
| 26. | Paragraphs 1 through 25, inclusive, are incorporated and made a part hereof as if more fully set forth herein. |
| 27. | Laidlaw’s filing of 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, as more fully described in paragraphs 17, 19 and 21, constitutes a wilful violation of Section 36b-23 of the Act, and such wilful violation forms a basis for an order to cease and desist to be issued against Laidlaw pursuant to Section 36b-27(a) of the Act, the revocation of Laidlaw’s registration as a broker-dealer in Connecticut pursuant to Section 36b-15(a)(2)(B), and the imposition of a fine against Laidlaw pursuant Section 36b-27(d) of the Act. |
| 28. |
Sands Brothers’ filing of 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, as more fully described in paragraphs 17, 19 and 21, constitutes a wilful violation of Section 36b-23 of the Act, and such wilful violation forms a basis for an order to cease and desist to be issued against Sands Brothers pursuant to Section 36b-27(a) of the Act, and the imposition of a fine against Sands Brothers pursuant to Section 36b-27(d) of the Act.
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V. ORDER TO CEASE AND DESIST AND NOTICE OF RIGHT TO HEARING
AS A RESULT OF THE INVESTIGATION BY THE DIVISION, THE COMMISSIONER FINDS that, with respect to the activity described herein, Laidlaw & Company (UK) Ltd. f/k/a Sands Brothers International Ltd. and Sands Brothers Asset Management LLC have violated the Consent Order and Section 36b-23 of the Act;
THE COMMISSIONER FURTHER FINDS that the issuance of this Order is necessary or appropriate in the public interest or for the protection of investors and consistent with the purposes fairly intended by the policies and provisions of the Act.
THE COMMISSIONER THEREFORE ORDERS that Laidlaw & Company (UK) Ltd. f/k/a Sands Brothers International Ltd. and Sands Brothers Asset Management LLC CEASE AND DESIST from violating the Consent Order and from directly or indirectly violating the provisions of the Act, including without limitation, filing documents with the Commissioner which are, at the time and in the light of the circumstances under which they are made, false or misleading in any material respect and omitting to state a material fact.
THE COMMISSIONER FURTHER ORDERS that, pursuant to Section 36b-27(a) of the Act, Laidlaw & Company (UK) Ltd. f/k/a Sands Brothers International Ltd. and Sands Brothers Asset Management LLC will be afforded an opportunity for a hearing on the allegations set forth above.
A hearing will be granted to Laidlaw & Company (UK) Ltd. f/k/a Sands Brothers International Ltd. and Sands Brothers Asset Management LLC if a written request for a hearing is received by the Department of Banking, Legal Division, 260 Constitution Plaza, Hartford, Connecticut 06103-1800 within fourteen (14) days following each Respondent’s receipt of this Order. The enclosed Appearance and Request for Hearing Form must be completed and mailed to the above address. If Laidlaw & Company (UK) Ltd. f/k/a Sands Brothers International Ltd. or Sands Brothers Asset Management LLC will not be represented by an attorney at the hearing, please complete the Appearance and Request for Hearing Form as “pro se”. Once a written request for a hearing is received, the Commissioner may issue a notification of hearing and designation of hearing officer that acknowledges receipt of a request for a hearing, designates a presiding officer and sets the date of the hearing in accordance with Section 4-177 of the Connecticut General Statutes and Section 36a-1-21 of the Regulations of Connecticut State Agencies. If a hearing is requested, the hearing will be held on July 17, 2007, at 10 a.m., at the Department of Banking, 260 Constitution Plaza, Hartford, Connecticut.
The hearing will be held in accordance with the provisions of Chapter 54 of the Connecticut General Statutes. At such hearing, Laidlaw & Company (UK) Ltd. f/k/a Sands Brothers International Ltd. and Sands Brothers Asset Management LLC will have the right to appear and present evidence, rebuttal evidence and argument on all issues of fact and law to be considered by the Commissioner.
This Order shall remain in effect and become permanent against Laidlaw & Company (UK) Ltd. f/k/a Sands Brothers International Ltd. if it does not request a hearing within the prescribed time period, and against Sands Brothers Asset Management LLC, if it does not request a hearing within the prescribed time period.
VI. NOTICE OF INTENT TO REVOKE REGISTRATION AS
BROKER-DEALER AND NOTICE OF RIGHT TO HEARING
WHEREAS, the Commissioner has reason to believe that Laidlaw has engaged in acts or conduct that, pursuant to Section 36b-15(a) of the Act, constitute grounds for revoking Laidlaw’s registration as a broker-dealer in Connecticut;
WHEREAS, the Commissioner believes that the issuance of an order revoking Laidlaw’s registration as a broker-dealer in Connecticut would be in the public interest and consistent with the purposes fairly intended by the policy and provisions of the Act;
AND WHEREAS, Section 36b-15(f) of the Act provides, in pertinent part, that “[n]o order may be entered under this section . . . without (1) appropriate prior notice to the . . . registrant . . . , (2) opportunity for hearing, and (3) written findings of fact and conclusions of law”.
NOW THEREFORE, notice is hereby given to Laidlaw that its registration as a broker-dealer in Connecticut shall be revoked, subject to its right to request a hearing on the allegations set forth above.
A hearing will be granted to Laidlaw if a written request for a hearing is received by the Department of Banking, Legal Division, 260 Constitution Plaza, Hartford, Connecticut 06103-1800, within fourteen (14) days following its receipt of this notice. The enclosed Appearance and Request for Hearing Form must be completed and mailed to the above address. If Laidlaw will not be represented by an attorney at the hearing, please complete the Appearance and Request for Hearing Form as “pro se”. Once a written request for a hearing is received, the Commissioner may issue a notification of hearing and designation of hearing officer that acknowledges receipt of a request for a hearing, designates a presiding officer and sets the date of the hearing in accordance with Section 4-177 of the Connecticut General Statutes and Section 36a-1-21 of the Regulations of Connecticut State Agencies. If a hearing is requested, the hearing will be held on July 17, 2007, at 10 a.m., at the Department of Banking, 260 Constitution Plaza, Hartford, Connecticut.
The hearing will be held in accordance with the provisions of Chapter 54 of the Connecticut General Statutes. At such hearing, Laidlaw will have the right to appear and present evidence, rebuttal evidence and argument on all issues of fact and law to be considered by the Commissioner.
If Laidlaw does not request a hearing within the prescribed time period, the Commissioner shall issue an order revoking its registration as a broker-dealer in Connecticut.
VII. NOTICE OF INTENT TO FINE RESPONDENTS AND NOTICE OF HEARING
WHEREAS, the Commissioner finds as a result of an investigation by the Division that Laidlaw and Sands Brothers have each committed one violation of the Consent Order and three violations of Section 36b-23 of the Act;
WHEREAS, the Commissioner believes that the imposition of a fine upon Respondents would be in the public interest and consistent with the purposes fairly intended by the policy and provisions of the Act;
AND WHEREAS, notice is hereby given to Respondents that the Commissioner intends to impose a fine not to exceed One Hundred Thousand Dollars ($100,000) per violation, or a maximum fine of Four Hundred Thousand Dollars ($400,000) on Laidlaw and a maximum fine of Four Hundred Thousand Dollars ($400,000) on Sands Brothers.
NOW THEREFORE, a hearing will be held in accordance with Section 36b-27(d)(2) of the Act and Chapter 54 of the Connecticut General Statutes.
The hearing will be held on July 17, 2007, at 10 a.m., at the Department of Banking, 260 Constitution Plaza, Hartford, Connecticut.
At the hearing, Respondents will have the right to appear and present evidence, rebuttal evidence and argument on all issues of fact and law relating to the allegations stated herein. If any Respondent fails to appear at such hearing, the Commissioner may order that the maximum fine be imposed upon such Respondent.
Dated at Hartford, Connecticut
this 18th day of May 2007. ________/s/_________
Howard F. Pitkin
Banking Commissioner
CERTIFICATION
I hereby certify that on this 21st day of May 2007, the foregoing 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 was sent by registered mail, return receipt requested, to Laidlaw & Company (UK) Ltd. f/k/a Sands Brothers International Ltd., at its mailing address at 90 Park Avenue, 31st Floor, New York, New York 10016, registered mail no. RB028033984US; and to Sands Brothers Asset Management, LLC, 90 Park Avenue, 39th Floor, New York, New York 10016, registered mail no. RB028033998US.
________/s/_________
Jesse B. Silverman
Prosecuting Attorney