Finra Bars Ex-Morgan Stanley Manager Who Oversaw Ami Forte
(Adds details of McCoy’s consent letter and of Morgan Stanley’s regulatory filing on his departure.)
Terry Lee McCoy, the Morgan Stanley branch manager who oversaw former star broker Ami Forte in Palm Harbor, Fla., has accepted an industry bar over allegations that he failed to act on “multiple red flags” of elder abuse, according to a settlement published Monday by the Financial Industry Regulatory Authority.
Finra, which also imposed a $75,000 fine, said that from September 2011 to July 2012, McCoy did not follow up on compliance alerts warning of excessive trading and losses in the accounts of “RS,” a wealthy 79-year old client who was showing signs of dementia. RS appears to refer to Roy Speer, the co-founder of Home Shopping Network, whose estate won a $34.4 million arbitration claim against Morgan Stanley, McCoy and Forte in March 2016.
Forte, who is not mentioned by name but referred to in the complaint as “AF” along with her associate, Charles Lawrence, “CL,” generated some $9 million in commissions from “well over” 2,000 trades in the 10 months. “Hundreds” of the trades were made without approval or switched in and out of the same bond in short period of time, according to the decision.
“McCoy missed evidence of the frequent use of discretion, notwithstanding RS’s obvious mental decline and the high frequency of extremely complex bond trading in the accounts — either of which should have warranted further investigation into how the trades were being recommended and processed,” Finra said. “RS was hospitalized several times, undergoing mental evaluation and even surgical procedures, yet hundreds of trades were placed in the accounts during these times.”
McCoy, who has not been registered since his departure from Morgan Stanley in November 2016, according to BrokerCheck, could not be reached for comment. He started in the industry in 1986 and joined Morgan Stanley in 1999 from Nationsbanc Investments, according to BrokerCheck.
His lawyer, Burton W. Wiand, did not return a call for comment, and a spokeswoman for Morgan Stanley also did not return a request for comment.
Finra in January sent Wells notices to both Forte and Lawrence saying that it plans to recommend disciplinary action against them for excessive and unsuitable trading. Neither Forte, who now works at Pinnacle Investments, nor Lawrence, who is a broker at R.F. Lafferty & Co., returned calls for comment. Lawrence was acting at Forte’s direction, according to the Letter of Acceptance, Waiver and Consent that McCoy signed.
Finra accused McCoy of failing to properly review or respond to 10 automatically generated “Actimize” compliance alerts about the high cost-to-equity and the losses in RS’s accounts, despite the fact that he met with the client several times a week, sometimes alone and sometimes accompanied by Forte and Lawrence.
The consent letter, which McCoy signed without accepting or denying the findings, also asserts that the investment objective attached to RS’s accounts were changed without authorization to “speculation” from “income” shortly before Speer died. The change triggered an automated notification to McCoy, but the Finra consent letter says he “did not detect that the account objectives had changed or investigate how they changed without RS’s approval.”
Finra also asserted that McCoy failed to review the fact that Lawrence at one point executed at least 300 trades in less than five minutes—with the majority done in less than one minute.
Morgan Stanley fired Forte and Lawrence in March 2016 following the arbitration decision. The U5 notice that the firm filed with regulators about McCoy’s mutually agreed-to termination in November said his departure followed “a previously reported arbitration decision” and his related leave of absence.