Former Morgan Stanley broker Ami Forte responded to a Finra lawsuit charging her with churning by arguing that the suit reflects the industry's longstanding discrimination against women.
On Thursday, the
Financial Industry Regulatory Authority Inc. hit Ms. Forte with a suit alleging that in 2011 and 2012, she engaged in unsuitable trading in the account of a client who was on his deathbed, generating more than $9 million in commissions in less than a year.
The client is identified only as RS in Finra's complaint. But in 2016, Ms. Forte was fired by Morgan Stanley after the widow of cable shopping pioneer Roy M. Speer, who co-founded the Home Shopping Network,
sued Morgan Stanley for $400 million.
In March 2016, a Finra arbitration panel awarded more than $34 million to the estate of Mr. Speer for its claim against Morgan Stanley for churning Mr. Speer's account.
In the press release, Ms. Forte also said the suit showed Finra was acting in the interests of Morgan Stanley.
As previously reported, Ms. Forte is suing Morgan Stanley for wrongful termination, gender discrimination and defamation.
She denied any wrongdoing involving Mr. Speer's accounts. "I intend to fully defend myself against these baseless charges, and I denounce the motives behind them," Ms. Forte said, according to the release. "It's time for Finra to stop being Morgan Stanley's lap dog. Finra is supposed to regulate Morgan Stanley, not do its bidding."
A Finra spokesperson declined to comment, adding that litigation is pending.
A Morgan Stanley spokesperson, Christine Jockle, wrote in an email that "Finra's enforcement proceeding speaks for itself."
"Morgan Stanley looks forward to addressing Ms. Forte's conduct and her baseless claims in its upcoming arbitration with her," Ms. Jockle wrote.
Ms. Forte's attorney, Robert J. Pearl, said in a phone interview that "There was no basis for a churning charge."
"Beyond that my client wasn't even handling the account," Mr. Pearl said. "She wasn't directing the trading in the account. I think [Finra] has a hell of a nerve to file this regulatory complaint."
He added that Mr. Speer and Ms. Forte had a long-term relationship that ended years before the period in question, or 2011.
Ms. Forte was registered as a broker with Pinnacle Investments this March, but she left the firm in October,
according to her BrokerCheck profile. She is not currently registered as a broker.
According to this week's lawsuit by Finra, RS had been Ms. Forte's client since the late 1990s, when they began a romantic relationship. Ms. Forte occupied a position of
trust and confidence with RS through her personal, brokerage and business relationships that lasted until his death in mid-2012.
Over a 10-month period from September 2011 through June 2012, after RS had been diagnosed with severe cognitive impairment, Ms. Forte and a colleague on her team, Charles J. Lawrence, made more than 2,800 trades in RS's accounts, generating more than $9 million in commissions.
Mr. Lawrence is also charged in the complaint, which alleges the two brokers violated industry rules regarding excessive trading and churning, unsuitable short-term trading of long-term investment products, exercising discretion in the client's accounts without written authorization, and unethical business conduct.
Mr. Lawrence hung up on a reporter when reached for comment.
Ms. Forte was a registered broker with Morgan Stanley from January 2000 to April 2016. The RS accounts generated almost 94% of Ms. Forte's commissions, according to Finra. Barron's magazine tapped her as the No. 1 female financial adviser in the country from 2010 to 2012.
Ms. Forte and Mr. Lawrence were allegedly aware of their client's vulnerable mental state but never reported that information to the firm. Over half of the 2,800 trades in question involved long-term bonds, including municipal bonds, according to Finra. Such bonds typically carry high commissions and are intended to be held for a long period of time by the investor.
Finra, a self-regulatory organization, and its offices can sue registered brokers and employees of brokerage firms to bring disciplinary actions against them. In January, Finra filed Wells Notices against both Ms. Forte and Mr. Lawrence, according to their BrokerCheck profiles. A Wells Notice serves as a signal that a regulator may later bring a disciplinary action against a broker.
