FINRA moved to potentially discipline former Morgan Stanley broker Ami Forte and a colleague over alleged churning and other misconduct, prompting her to decry what she sees as unfair punishment.
The exchange of barbs between FINRA and Forte is the latest chapter in a years-long drama that has played out in arbitration forums, entailed romantic affairs and seen careers upended.
In a new filing, FINRA accuses Forte and another ex-Morgan Stanley broker, Charles Lawrence, of churning, unsuitable recommendations and unauthorized use of discretion in a client’s accounts, among other misconduct.
“It’s amazing the desperate lengths that have been taken to prove misconduct against me where none occurred. I engaged in no improper behavior and fully followed all FINRA and Morgan Stanley rules and standards of conduct. I intend to fight these inaccurate and unfair charges in every way possible, and I refuse to be bullied by false accusations,” Ms. Forte said in a statement.
Lawrence could not be reached for comment.
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Although an arbitration panel sided against the wirehouse, it awarded her far less than the $476 million in damages she had sought.
March 21 -
Her fresh criticism comes after FINRA barred her former Morgan Stanley branch manager this week.
June 21 -
The client, who was the co-founder of the HSN, suffered from dementia and was declared legally incompetent, according to a FINRA letter of acceptance, waiver and consent.
June 19 -
The wirehouse terminated the broker two days after losing a $34 million arbitration case brought by the client's widow, who alleged elder abuse and other misconduct.
May 11
FINRA’s actions come after the regulator made a preliminary determination in January 2018 to recommend that disciplinary action be brought against Forte and Lawrence, according to notes contained in their FINRA BrokerCheck records. It also comes two years after
Lynnda Speer alleged that Forte, who was romantically involved with Roy Speer, had engaged in unsuitable and unauthorized trading in her husband’s accounts. Lynnda Speer also accused Morgan Stanley of negligent supervision of its brokers. A FINRA arbitration panel ruled in her favor in March 2016.
Later that month, Morgan Stanley terminated Forte’s employment at the firm for allegedly failing to follow industry rules and firm policies with regard to “use of trading discretion and timely reporting of liens,” according to a note contained in Forte’s BrokerCheck record.
FINRA does not name Roy Speer in its recent filing for an enforcement action against Forte and Lawrence, but instead refers to the allegedly wronged client by the initials RS.
Lawrence was a member of Forte’s team at Morgan Stanley. The regulator says he and Forte engaged in “qualitatively and quantitatively unsuitable trading” in the client’s accounts, bringing in more than $9 million in commissions in just one year, according to FINRA’s 21-page disciplinary filing.
During the period of alleged misconduct from 2011 to 2012, RS had six accounts at Morgan Stanley totaling approximately $192 million, according to FINRA’s disciplinary filing.
At time this, Forte and Lawrence knew their client was suffering from cognitive decline, FINRA claims. The regulator says his doctors identified that he was suffering from dementia as early as 2009, and that one doctor recommend he stop driving. And between 2011 and 2012, four doctors diagnosed Speer on five occasions with severe cognitive impairment.
“Yet, Forte and Lawrence never reported RS’s condition to Morgan Stanley,” the regulator alleges, adding that they in fact upped their level of trading after his diagnosis. And this trading consequently boosted commissions, FINRA says.
For example, during a period from Jan. 10 to Feb. 28, 2012, Forte and Lawrence bought and sold millions of dollars of Santander UK PLC bonds, FINRA says. Those trades generated $140,000 commissions. Had Speer only purchased the bonds one time on Jan. 10 and sold them one time on Feb. 28, the resulting commissions would totaled about $18,000.
Speer died at age 80 in 2012.
Forte flatly denies the allegations, contending that she was not involved in any trading. She also says that the firm knew of the client’s mental state and that her branch manager at Morgan Stanley helped with his estate planning needs.
Forte calls attention to what she sees as disproportionate justice; FINRA is targeting her for alleged misconduct but not Morgan Stanley, which she is currently suing for alleged discrimination.
“FINRA is supposed to regulate Morgan Stanley, not do its bidding,” she said.
Her attorney, Robert J. Pearl, also heaped criticism on FINRA. “At best, this is a textbook example of mismanaging your priorities, and at worst, it’s blatant sexism and corruption,” he said in a statement.
A FINRA spokeswoman declined to comment on the matter.
Forte and Speer’s advisor-client relationship stretched back to the 1990s. They also started a romantic relationship at that time, according to FINRA’s filing.
Forte, who became an advisor in 1994, moved her practice to Morgan Stanley from Bank of America in 2000, according to BrokerCheck records. Lawrence joined her team, the Forte Group, in 2001. Although he entered most day-to-day trades in the RS accounts, Forte remained the broker of record, according to FINRA. The RS accounts amounted to 94% of Forte’s commissions.
Lawrence received no commissions, working on a salary-plus bonus arrangement, according to FINRA. Morgan Stanley discharged Lawrence in March 2016. He’s currently registered with brokerage R. F. Lafferty, according to BrokerCheck.
Forte is not currently registered with any firm.
