FINRA bars Ami Forte for allegedly churning accounts of HSN's co-founder
She was once a top Barron's advisor and a star broker at Morgan Stanley. This week, Ami Forte was barred by FINRA.
The regulator banned her and a former colleague for allegedly exploiting the then 79-year-old disabled co-founder of the Home Shopping Network, with whom Forte was found to have been having an affair.
Forte had previously challenged FINRA's investigation into her conduct, claiming that she had done nothing improper.
“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,” Forte said in December 2018.
Following news of the ban, she reiterated that she engaged in no msiconduct.
“I am pleased that we have been able to reach an amicable settlement with FINRA to resolve this matter and to end potentially expensive and protracted litigation,” Forte said in a press release. “As specified in the settlement, I have admitted absolutely no wrongdoing.”
FINRA's action follows years of regulatory investigations and litigation, including an arbitration case brought against Morgan Stanley by Lynnda Speer, the widow of HSN co-founder Roy Speer, who sought damages for alleged churning and negligent supervision. In March 2016, arbitrators ordered Morgan Stanley to pay her $34 million.
The regulator's action also comes more than a year after it barred former Morgan Stanley manager Terry McCoy and fined him $75,000 for negligent supersion.
Roy Speer had been Forte's client since the late 1990s, according to FINRA which alleged that the two also had a romantic relationship going back to around that time.
On Monday, FINRA said Forte and former Morgan Stanley colleague Charles Lawrence had allegedly violated several regulations on books and records, fair dealing and suitability between September 2011 and June 2012. Forte and Lawrence asked to settle last week while neither admitting nor denying the charges.
Speer, who died in August 2012, was suffering from severe cognitive impairment. Forte and Lawrence conducted transactions in Speer’s accounts without his authorization, FINRA said.
"Churning the account of an elderly customer who suffered from severe cognitive impairment is an egregious violation of the high ethical standards to which FINRA holds all associated persons," Jessica Hopper, acting head of FINRA's Department of Enforcement said.
Over half of the 2,800 trades over the 10 months were long-maturity bonds, including municipal bonds. Forte and Lawrence generated more than $9 million in commissions during that time, FINRA found.
Speer’s accounts generated about 94% of Forte’s commission revenues and allowed her to garner the number one ranking on Barron’s Top 100 Women Financial Advisors list for 2010, 2011 and 2012.
After doctors diagnosed Speer as suffering from cognitive impairment, FINRA alleged Forte and Lawrence increased their level of trading.
Forte and Lawrence met frequently with their client and knew he was impaired, FINRA alleged, but never reported that fact to Morgan Stanley. Many of their trades were not suitable for Speer, according to FINRA, such as short-term trading of long-term investment products like bonds with long-term maturity dates.
From June 20, 2012 to June 29, 2012, Speer was hospitalized and was not in contact with Forte, but his accounts had over $14 million in transactions, FINRA found.
Forte’s lawyer, Robert Pearl, believes that FINRA gave Morgan Stanley a “free pass.”
“FINRA 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 in a press release. His law firm is based in Naples, Florida.
During the relevant period the trading in Speer’s accounts took place through trades entered by Lawrence, not Forte, Pearl said.
“Morgan Stanley was not cited by FINRA despite the fact that all the recommendations came from its trading desk,” Pearl said. “It’s curious that Morgan Stanley never got cited,” Pearl added and said that the inaction was “startling.”
Forte is suing Morgan Stanley and Pearl said the next hearing will be in May.
--With additional reporting by Andrew Welsch.