Former Morgan Stanley investment brokers Ami Forte and Charles Lawrence have been permanently barred from the broker-dealer industry for their involvement in making thousands of improper trades in the accounts of Home Shopping Network co-founder Roy Speer during the last months of his life.
The enforcement action was announced Monday by the Financial Industry Regulatory Authority, a non-government, not-for-profit organization authorized by Congress to protect investors by writing and enforcing rules governing the activities of more than 600,000 brokers nationwide.
In settling the case, Forte and Lawrence consented to the authority’s findings but neither admitted nor denied charges that they took advantage of Speer after he had been diagnosed with dementia before his death at age 80 in August 2012.
In the months before then, regulators said, Forte kept in near-daily touch with Speer and “used her position of trust and confidence to exploit" him, leading to more than 2,800 trades and $9 million in commissions.
"Churning the account of an elderly customer who suffered from severe cognitive impairment is an egregious violation,” Jessica Hopper, the authority’s senior vice president and acting head of its enforcement department, said in announcing the ban.
Forte’s attorney, Robert Pearl of Naples, countered that the case against his client had been narrowed to trades “engaged in and overseen by other Morgan Stanley employees, not Ms. Forte,” whose last name is pronounced FOR-tay.
“I am pleased that we have been able to reach an amicable settlement with (regulators) to resolve this matter and to end potentially expensive and protracted litigation," Forte said in a statement released through her attorney.
“I have admitted absolutely no wrongdoing,” she said. “In addition, (the authority) will not be pursuing any claims against me for monetary fines or any form of restitution. ... As I have previously stated, I neither placed nor supervised any of the trades that (the authority) has deemed inappropriate.”
Forte first met Speer, identified in regulatory filings by his initials, in the late 1990s, when he was her customer at Bank of America, and the two developed both business and romantic relationships, regulators said.
In early 2000, Forte moved to Morgan Stanley, where Speer opened multiple accounts listing her as broker of record. In 2001, Forte established the Forte Group at Morgan Stanley, which Lawrence joined at its inception, regulators said. Forte headed the group as senior vice president. By 2009, Forte had tasked Lawrence with entering most of the Forte Group’s day-to-day trades on the Speer accounts.
From September 2011 through June 2012, the Forte Group made more than 2,800 trades in Speer’s accounts, generating approximately $9 million in commissions. More than half of those transactions involved short-term trading in long-maturity bonds, including municipal bonds designed for customers with long-term investment horizons.
In one nine-day period in June 2012 when Speer was hospitalized and not in contact with anyone from the Forte Group, his accounts still did more than $14 million in transactions, regulators said.
In 2016, a three-member Financial Industry Regulatory Authority arbitration panel awarded Speer’s widow, Lynnda Speer, $32.8 million, plus costs and fees, from Morgan Stanley, Forte and former Morgan Stanley Palm Harbor branch manager Terry McCoy.
While the Financial Industry Regulatory Authority case is over, Forte is still suing Morgan Stanley for tens of millions of dollars over what she contends was a wrongful termination.
“I have agreed with (the Financial Industry Regulatory Authority) that I will no longer seek employment in the brokerage industry, an industry to which I devoted most of my adult life,” she said. But she said the Morgan Stanley termination had already “effectively ruined” her career.
In response, a Morgan Stanley spokeswoman said in an email the company had nothing to add to a statement it first made in 2016: "“Ms. Forte’s claims overlook the fact that she was already adjudicated as jointly liable for the award (to Speer’s widow) based on her conduct. Despite this, Ms. Forte has failed to contribute anything to the amount awarded, and has also failed to repay substantial sums loaned to her in connection with her employment. We categorically reject her claims against Morgan Stanley and look forward to addressing all these issues at a hearing on the merits.”
Pearl contended the Financial Industry Regulatory Authority has “failed to cite Morgan Stanley for any of the alleged wrongdoing of its employees who were responsible for entering trades in the Speer accounts and for supervision over those accounts. This includes its branch manager." (McCoy was barred from acting in principal or supervisory activities by the Financial Industry Regulatory Authority and fined $75,000 after he consented, without admitting to or denying the accusations, to findings that he failed to properly supervise brokers engaged in “excessive and unsuitable trading” on Speer’s accounts.)
The authority “alone can explain why it gave Morgan Stanley, a firm which made many millions of dollars off the Speer accounts and was found liable in the underlying Speer arbitration proceeding, a free pass but filed charges against the Morgan Stanley personnel who were relying on Morgan Stanley’s management to properly supervise these accounts,” Pearl said.
The Tampa Bay Times has asked the Financial Industry Regulatory Authority whether it has any response to Pearl’s claims, and has left voicemail and text messages giving Lawrence an opportunity to respond to the authority’s action. This article will be updated as they respond.
Contact Richard Danielson at firstname.lastname@example.org or (813) 226-3403. Follow @Danielson_Times