Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Financial Planning > Tax Planning

What the Case of a Broker Who Had an Affair With a Billionaire Client Means for Advisors

Your article was successfully shared with the contacts you provided.

When Morgan Stanley superstar advisor Ami K. Forte met high-profile billionaire Roy M. Speer at a ritzy Florida party in 1999, the encounter had every hallmark of a match made in financial services heaven.

But in toppling Forte from her lofty perch 14 years later, the pair’s personal relationship served to generate a scandalous, litigious hell. Indeed, the years-long affair that client and advisor would enjoy — launched after the married Speer, co-founder of television’s Home Shopping Network, signed on with the divorced Forte — has had ravaging consequences for both Forte and Morgan Stanley. Booming reverberations continue to this day.

Tangled Tale

It is a tangled web — and cautionary tale — encircling the issues of personal client-advisor relationships, elder exploitation and gender discrimination.

The first female FA to be named a Morgan Stanley managing director, Forte was a Chairman’s Club member for 15 consecutive years and No. 1 on Barron’s Top 100 Women Financial Advisors list two years in a row.

Until a contentious three-year arbitration case by Speer’s widow led to Forte’s undoing, she was arguably the firm’s most prominent and celebrated financial advisor.

So far, the brouhaha has cost Morgan Stanley more than $34 million. Loss of her reputation and job is the price that Forte, 58, has paid. And now, all her retirement savings are at stake too.

The Forte Group, at the wirehouse’s Palm Harbor, Florida, branch, managed $2 billion in assets. Of that, Speer’s fixed-income account totaled $150 million to $200 million, or about 10%. In the years that Forte managed investments for the active bond trader, on Forbes’ 400 List of richest Americans, he realized a net gain of $24 million.

In 2012, Speer died at age 80. The following year, his widow, Lynnda L. Speer, filed an arbitration case against Morgan Stanley, Forte and her branch manager. Speer alleged churning in her late husband’s account from 2009 through 2012, citing, specifically, 12,000 unauthorized trades generating nearly $40 million in commissions paid to Forte.

Speer argued that the FA and Morgan Stanley had taken advantage of her spouse, who, she claimed, suffered diminished mental capacity in his later years and was “wheelchair-bound and diapered … and attended to daily by a full-time caregiver.” During his final year, he was under a guardianship.

After 142 sessions, on March 21 of this year, a Financial Industry Regulatory Authority panel in Tampa, Florida, ordered Morgan Stanley, branch manager Terry McCoy and Forte to pay more than $34 million on Speer’s claims of unauthorized trading, churning, breach of fiduciary duty, negligent supervision, elder exploitation and unjust enrichment.

“I’m very pleased the arbitration recognized that Ms. Forte and her colleagues breached their fiduciary duties to Roy … and exploited him during a time of his continuing mental and physical decline … We’re hopeful the outcome of his case will prevent other elderly investors from being taken advantage of by their stockbrokers,” Speer reportedly commented.

Two days later, Morgan Stanley, based on the panel’s award, fired Forte. Now, months later, the wirehouse still refuses to release her millions of dollars in retirement savings, which she maintained at the firm — including 401(k) plan investments, deferred compensation, earned income and Morgan Stanley stock — and is pressing her to pay a share of the arbitration award.

Forte remains in total shock. “Morgan Stanley trotted me out as an example of how women can succeed at the firm. I was their 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 says, tearfully, in an interview.

To recoup her assets and good name, Forte brought a multi-million-dollar wrongful termination and defamation suit against the firm in May, claiming it filed a “fabricated” Form U-5 about her discharge, making it unlikely she’ll ever work as a financial advisor again. The U-5 states that she was terminated because of “concerns relating to disclosed arbitration award … issues with conduct including … adherence to … firm policy regarding use of trading discretion, concealed personal relationship with client and timely reporting of liens.”

Forte denies responsibility for the alleged unauthorized trades since, she says, she’d given up trading authority in Speer’s account in late 2007, when she and the billionaire ended their affair. Her name, however, remained on the account as the advisor of record.

Morgan Stanley’s response to Forte’s arbitration claim states: “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 and look forward to addressing all these issues at a hearing on the merits.”

Forte, with Morgan Stanley for 16 years, had received sizeable retention bonuses.

The former advisor’s suit against the firm was a smart pre-emptive move, “but [Morgan Stanley] rightly terminated her based on the arbitration panel’s findings. And the firm was right to come after her for her pro rata share of the award,” says Erwin Shustak, a longtime securities arbitration attorney and managing partner, Shustak, Reynolds & Partners.

Elder Issue

Elder exploitation, the thrust of Speer’s suit, is an issue of increasing importance and one to which mindful advisors should turn their attention.

“Awareness of elder exploitation is rising because of the aging boomer population. Certainly, the number of elderly customers dealing with diminished cognitive capacity is increasing,” says Bryan Ward, a partner in Holcomb + Ward, a law practice that focuses on financial services disputes.

Thus, it’s not surprising that the frequency of elder exploitation is “absolutely increasing,” according to Scott Silver, a Fort Lauderdale, Florida-based attorney who specializes in arbitrations and investor fraud court cases.

In one recent action, a 94-year-old investor, whom Silver represented, lost more than $1 million in assets in under 90 days. He was a client of a well-known online discount firm that refused to put a stop on his trading even though the man’s advisor “begged it to do so because his trading had become completely erratic and irrational,” Silver says. The case was settled.

In Forte’s experience working at Morgan Stanley, if something seemed amiss concerning an elderly client’s mental capacity, “it was protocol that there [be] communication with the family. Or if someone in the family was concerned, they’d call; and we’d sit down and discuss it with the client. But that never happened with [Speer]. No one from the family ever called,” she says.

In fact, Forte disputes that Speer, an assistant Florida state attorney in 1965, had “mental problems.” He often visited the branch — after she personally ceased trading in his account — to direct his investments in discussions with broker Charles J. Lawrence and branch manager McCoy. During that time, Forte observed no diminishment in Speer’s cognitive function. In 2012, he suffered a major health event, after which she had no further contact with him.

The ex-FA had tried to resign the account when she and Speer ended their romance, Forte insists. “But Roy wouldn’t agree for me to be off it completely. It was important for him that I was compensated because he was [at Morgan Stanley] because of me,” Forte recalls. He said, ‘If you’re not compensated, I’m going to another firm.’ Clearly, the firm did not want that to happen. So this was a way to keep the firm happy, keep Roy happy and let me have some business. Until the arbitration was filed, everybody was happy.”

Roy and Lynnda Speer were estranged for 30 of their 52 years of marriage. Though Speer kept his financial life away from his wife, she was all too aware of his extramarital life, especially the affair with his financial advisor. Right after his death, she moved his accounts out of Morgan.

“She didn’t reveal that she had any problems with the management of Roy’s account. It was only about the [personal] relationship,” Forte says.

Speer positioned her arbitration complaint to pivot on elder exploitation.

The fact is that nearly 7 million people —17% of Americans over age 65 — have been “taken advantage of financially [because of] an inappropriate investment, unreasonably high fees for financial services or outright fraud,” according to survey results released this past March by the Investor Protection Trust.

Wirehouses have been working with FINRA on how to best handle the elder exploitation issue, statutes on which vary across the country. Recently, two rule changes were proposed, Ward notes. One would require another party to make investment decisions should the client become incapacitated; the other would require firms to place holds on accounts where elder abuse is suspected.

The best approach for FAs right now is to report red flags to their compliance departments or senior management, securities attorneys say. Several large firms, including Morgan Stanley, conduct FA training programs that provide specific steps to follow.

“The most egregious situations involve financial advisors who see diminished capacity and exploit the client. We’re seeing more and more of that in [retiree-populated] Florida — but not just exploitation by brokers,” Silver says.

Gender Contention

Meanwhile, Forte maintains that her termination smacks of another sort of civil rights violation: gender discrimination. “All the men [at Morgan Stanley] who were managing directors that were let go — who [actually] did things against the rules — left with clean U-4s and received all their deferred compensation and, in many cases, a year’s salary,” she asserts.

Broker Lawrence was discharged the same day that Forte was fired, but branch manager McCoy remains in his job.

Forte’s termination 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 for the wrongful termination action, Robert J. Pearl, whose eponymous law firm is based in Naples, Florida.

But the ex-FA could face a tough battle to prove gender discrimination, other lawyers say.

“She was one of the biggest producing brokers at the firm and their representation that ‘a woman can make it in this business.’ But then,” Shustak says, “she lost a huge arbitration with findings that she had slept with the client, mismanaged the account and failed to disclose a tax lien [which Forte claims was an IRS error]. When a woman rises to the top of the nation’s producing registered representatives and is then let go for what seems like legitimate reasons, it’s very hard to argue discrimination.”

To make matters potentially grimmer, FINRA is now conducting a regulatory investigation of the Speer case, which could result in fines and penalties for Forte or Morgan Stanley, or both.

FINRA declined to comment on either of the arbitrations or the investigation.

Fateful Relationship

Forte met Speer when she was an FA with Banc of America Investment Services, later moving to Morgan Stanley at the same time the investor transferred his account there. At their first meeting, they talked bonds, Forte offering to give Speer a second opinion on one of his accounts. She landed it. Over the years, she managed a growing number of investments in Speer’s hefty portfolio. By then, a personal relationship had developed.

Long before Speer’s widow filed suit, Morgan Stanley knew of Forte’s romance with her client, according to Forte. The two didn’t particularly try to hide it; they were a well-known item for years. That personal relationship and the issue of Forte’s tax lien were resolved internally in a letter that Morgan Stanley asked Forte to sign in 2013, Pearl says.

On the day she was dismissed, the Morgan Stanley attorney who had represented Forte in the Speer arbitration abruptly resigned as her lawyer.

“I would have advised her at the very beginning that she needed separate counsel. I would have said, ‘If you lose the [Speer] arbitration, Morgan Stanley is going to come after you,” says Edward Gartenberg, of Gartenberg Gelfand Hayton, in Sherman Oaks, Calif. Over the decades, he has litigated numerous FINRA arbitrations.

Now Forte, whose son, Evan Forte, was an FA trainee on his mother’s team and remains at the Palm Harbor branch, is deeply frightened about her financial future and rueful that she trusted her former employer.

“I did everything they ever asked of me, including being dragged through the mud and lied about in the [Speer] arbitration. I want to move on,” Forte says, weeping. “But now I can’t because they’ve given me no choice. I feel completely betrayed and very used.”

— Related on ThinkAdvisor:



© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.