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May 19, 2016 at 10:41 AM
The client was a colorful, high-profile billionaire on Forbes’ 400 List of richest Americans. In charge of his hefty investment portfolio at Morgan Stanley, in Palm Harbor, Florida, was a superstar financial advisor with $2 billion in assets under management. She was the first female FA to be named a managing director of the firm, a member of the Chairman’s Club for 15 consecutive years and No. 1 on Barron’s Top 100 Women Financial Advisors list two years in a row.
They were Home Shopping Network co-founder Roy M. Speer, married, and his divorced advisor, Ami K. Forte, lovers for nearly a decade. Surely neither expected that their personal relationship would result in ravaging consequences for Forte and her firm. After all, at Morgan Stanley and around town, they’d been a well-known item for years.
Speer’s account totaled $150 million to $200 million, about 10% of The Forte Group’s AUM. Ultimately, the fixed-income account, in which Speer vigorously traded, brought him a net gain of $24 million.
In 2012, Speer died at age 80. On March 21 of this year, a Financial Industry Regulatory Authority arbitration panel in Tampa, Florida, ordered Morgan Stanley, branch manager Terry McCoy and Forte to pay Speer’s widow, Lynnda L. Speer, and Roy Speer’s foundation more than $34 million on Ms. Speer’s claims of unauthorized trading, churning, breach of fiduciary duty, negligent supervision, elder exploitation and unjust enrichment related to the Roy Speer account.
Two days later Morgan fired Forte, arguably the firm’s most prominent and celebrated financial advisor.
Now a humiliated Forte, claiming that Morgan filed a “fabricated” Form U-5 about her discharge, making it unlikely that she’ll ever work as a financial advisor again, has brought a multimillion-dollar wrongful termination and defamation arbitration case against the firm.
The principal objectives of the action are to recoup her life savings, which Morgan refuses to release to her, correct the public record and restore her good name.
“Morgan Stanley treated me as an example of how women can succeed at the firm. I was the spokesperson to make them look good with women. I helped them recruit women. Now I’ve been discarded and treated like a commodity. They threw me under the bus. I’m 58 years old. How am I going to survive?” Forte said, tearfully, in an interview with ThinkAdvisor.
Her U-5 states that Forte was terminated because of “concerns relating to disclosed arbitration award involving former client and issues with conduct including … adherence to industry rules and/or firm policy regarding use of trading discretion, concealed personal relationship with client and timely reporting of liens.”
Speer’s arbitration focused on alleged churning in the Speer account; specifically, about 12,000 unauthorized trades generating nearly $40 million in commissions paid to Forte.
The former advisor contends there was no misconduct on her part that could have resulted in the FINRA panel’s decision: She had given up trading authority in the account in late 2007, two years before the period that those 12,000 trades were made.
Responding to Forte’s arbitration suit against the firm, Morgan said, in a statement: “Ms. Forte’s claims overlook the fact that she was already adjudicated as jointly liable for the award based on her conduct. Despite this, [she] has failed to contribute anything to the amount awarded, and has also failed to repay substantial sums loaned to her in connection with her employment. We categorically reject her claims against Morgan Stanley.” Forte’s filing suit was a good move, according to Erwin J. Shustak, managing partner, Shustak, Reynolds & Partners and for four decades a specialist in securities arbitrations.
“She did the smart tactical thing by suing first. She struck preemptively and said bad-faith termination because she knew that Morgan Stanley was going to come after her. But the firm rightly terminated her based on the arbitration panel’s findings. And the firm has a right to come after her for her pro rata share of the award.”
But Forte insists that Morgan, who has paid the total award, has never made a formal demand that she contribute.
As for the firm’s refusal to release her retirement savings — including 401(k) plan investments, vested and unvested benefits, deferred compensation, earned income and Morgan Stanley stock — it all boils down to a contract, legal experts say.
“If there’s a contract that gives the firm the right to hold back funds that she claims she’s owed, then the issue is simply contract-driven,” says a securities attorney whose practice focuses on BD and advisor litigation. He declined to be identified because his firm represents Morgan in other cases.
A Gender Issue
Forte, who lives near Tampa, Florida, claims that her firing smacks of sex discrimination.
“This is a case of disparate treatment of women, especially on the executive level. If Ami were a man, it wouldn’t have happened,” says Forte’s attorney Robert J. Pearl, whose eponymous law firm is based in Naples, Florida.
During her employment at Morgan, “all the men who were managing directors that were let go — who did things against the rules — weren’t ‘discharged,’” says Forte. “They were allowed to leave as a voluntary termination ‘for better opportunities.’ They left with clean U-4’s and received all their deferred compensation and, in many cases, a year’s salary.”
Morgan’s reference to Forte’s failure to repay loans addresses the sizable retention bonuses that she received. The ex-FA was with the firm for 16 years.
“They terminated her saying we’re not going to allow you to earn money in the future, and we demand that you pay us money. Our arbitration says this is a no-no. You don’t get away with depriving her of her livelihood and then demand money back,” Pearl says.
There’s more to this tangled web: FINRA is conducting a regulatory investigation of the Speer case. Such investigations are not unusual but could result in fines and penalties for Forte or Morgan, or both.
FINRA declined to comment on either of the arbitrations or the investigation.
Forte’s chief defense in the 142-sessions-long Speer arbitration was that though her name was on the account as the advisor of record, she was not managing the investments during the relevant period, 2009-2012. When she and Speer ended their affair in 2007, she turned over trading authority to broker Charles J. Lawrence and branch manager Terry McCoy. That way, she no longer would be required to have continual communication with the active trader over his investments.
Lawrence was discharged the same day Forte was dismissed. McCoy remains in his job.
“[McCoy] is a man, and he’s management,” Forte says, alluding to the gender discrimination issue.
Morgan declined to comment on whether McCoy and Lawrence have contributed payment to the Speer award. Forte’s position that “the things that went on in the account did not bear her fingerprints is a hollow defense,” says the lawyer whose firm works with Morgan. “When you’re being paid commissions, you can’t have it both ways.”
Shustak adds: “If your name is on the account as the broker of record, you’re responsible for what goes on in the account in a supervisory capacity.”
