FINRA has barred and fined a former Morgan Stanley manager for $75,000, after he failed to supervise a broker making excessive trades in the accounts of an elderly client suffering from dementia. The client, Roy Speer, was the co-founder of the Home Shopping Network.
Terry McCoy failed to properly supervise Ami Forte and another broker at the firm’s Palm Harbor, Florida office who “excessively and unsuitably” traded in Speer’s six accounts. The trades resulted in more than $9 million in commissions, the regulator says.
Speer’s widow accused Forte of manipulating him toward the end of his life by having an affair with him beginning around 1999 and ending in 2007. In the fall of 2011, doctors concluded that he suffered from dementia and later declared him legally incompetent in a near constant state of confusion likely resulting from Alzheimer's disease, according to the FINRA letter. Speers died in August 2012.
“[The activity] included placing well over 2,000 trades in six accounts of complex corporate and municipal bonds,” says FINRA in the letter of acceptance, waiver and consent. “Further, in many instances, the trading activity included moving in and out of positions in the same bond in a matter of a few weeks or months.”
Speer was hospitalized several times and underwent several mental evaluations and surgical operations, while hundreds of the trades took place, according to the FINRA letter. McCoy failed to detect 300 such trades that were entered in less than five minutes — the majority of which posted in less than one minute.
An arbitration panel ordered Morgan Stanley to pay about $34 million for the improper trading in 2016. While considerable, the award fell short of the $476 million in compensatory and punitive damages that was sought, according to a copy of the award. "Although disappointing, it is a small fraction of the more than $476 million sought by the claimants,” a Morgan Stanley spokesman said at the time. “Even so, the award is inconsistent with substantial evidence showing that the accounts were profitable for the client and managed in accordance with his wishes.”
While the accounts may have been profitable, the trades were still improper considering that none of the accounts were approved for discretionary trading, FINRA says in the letter.
Morgan Stanley filed a Form U5 terminating McCoy’s association with the firm in November 2016 after 17 years with the firm, per FINRA BrokerCheck records. An attorney for McCoy, Burton Wiand, did not return a request for comment.
Forte has said she didn’t manage the accounts at the time of the improper trading. She is currently employed by Pinnacle Investments, per BrokerCheck. “It’s refreshing to be part of a financial services firm where women are represented throughout the organization,” Forte said in a company press release announcing her employment at the firm in March.
In a statement, Forte denied any wrongdoing.
Pinnacle did not respond to a request for comment.
Forte has also filed her own arbitration case against her former firm. Morgan Stanley fired her shortly after the March 2016 arbitration award, and FINRA gave notice in January of a preliminary recommendation of disciplinary action against her, according to her BrokerCheck record.
Morgan Stanley declined to comment on the judgment.