Former Morgan Stanley Broker ‘Escapes’ Payment of $34M Arbitration Award
Ami Forte is not paying a penny of the $34 million award that arbitrators assessed against her and Morgan Stanley last month for making unsuitable and unauthorized trades in a client’s account, according to a regulatory filing.
The disclosure, which also reveals four tax liens that Forte failed to disclose in violation of federal securities regulations, is the latest twist in the strange tale of the formerly high-flying broker.
Forte, honored for three years as Barron’s Top Woman Advisor while piling up commissions in the account of a wealthy client with whom she was having an affair, was held jointly liable by a Financial Industry Regulatory Authority panel for paying the award, along with her Palm Harbor, Fla.-branch manager, Terry McCoy, and Morgan Stanley.
The $0.00 she actually contributed, along with the tax liens and confirmation of the affair, were disclosed in a Central Registration Depository Snapshot of the U-5 termination document that Morgan Stanley filed with state regulators.
Forte was fired by Morgan Stanley last month, two days after the arbitration award was issued, but the firm picked up its current and former employees’ share of the liability, said Scott Ilgenfritz, the attorney for the estate of Home Shopping Network co-founder Roy Speer, the principal claimant in the arbitration.
Since the $34 million award was announced, Morgan Stanley also has agreed to pay $3.8 million in attorney’s fees, Ilgenfritz said.
McCoy and Forte’s son Evan continue to work in the Florida branch. Charles J. Lawrence, a longtime associate who executed trades in the Speer account and who was fired along with Forte, recently joined R.F. Lafferty, a small brokerage firm. He had not been named in the arbitration.
A spokeswoman for Morgan Stanley did not respond to a request for comment.
TAX LIENS—WHO KNEW?
Forte was dismissed in part over her “concealed personal relationship with client” and her failure to timely report the liens, according to the U-5 summary.
Forte asserted that she did not become aware of the liens from state and federal tax authorities, issued from 2001 through 2014, because her accountant failed to disclose the information, according to her U-5 summary. All of the liens, the largest of which was for $119,109, have been resolved or satisfied, according to the document.
Brokers who fail to update their U-4 regulatory filings with information about liens risk losing their licenses, and the Financial Industry Regulatory Authority has been aggressively prosecuting such lapses, lawyers said. That is because liens can signal wider problems.
“Broker financial misconduct might not directly involve a retail investor,” says a new report from Securities Litigation and Consulting Group that calls for broader public disclosure of broker filings by the Financial Industry and Regulatory Authority.
“For instance, a broker might have unsatisfied liens or personal bankruptcies which reflect on the broker’s fitness to manage or guide other people’s investments and, as an empirical matter, help predict future customer complaints, arbitration filings.”