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October 26, 2018 at 10:30 AM
The Financial Industry Regulatory Authority earlier this month expanded its recommendation that disciplinary action be brought against former Morgan Stanley Advisor Ami Forte, following its initial Wells Notice sent in January.
FINRA said on Jan. 25 that it had made a preliminary decision that disciplinary action should be brought against Forte concerning potential violations of rules tied to excessive trading, suitability and high standards of commercial honor, according to her BrokerCheck records.
The Oct. 3 notice advises Forte of additional potential violations of rules tied to conflicts of interest, as well as the use of any device, scheme or artifice to defraud. Other violations included in the Oct. 3 notice relate to rules tied to the suitability of recommendations and transactions, conduct of municipal securities and municipal advisory activities, and books and records.
Forte, once Morgan Stanley’s most celebrated and prominent financial advisor with $2 billion in assets under management, lost her job at the wirehouse when an arbitration panel ordered her, her branch manager and Morgan Stanley to pay $38 million to the estate of Home Shopping Network co-founder Roy Speer in 2016. Lynnda Speer, the entrepreneur’s widow, argued that the estate had been harmed by unauthorized trading, churning and elder abuse. Forte had a romantic relationship with Roy Speer.
Forte had recently begun a career resurrection of sorts. In March of this year, Pinnacle Investments announced it hired her as chief business development officer.
However, as of Oct. 17, Forte no longer works at Pinnacle, according to BrokerCheck.
Forte maintains that she engaged in no wrongdoing and did not trade in the Speers’ accounts being investigated by regulators.
Former State Street Executive Sentenced to Prison for Defrauding Customers
A judge in federal court in Boston sentenced Ross McLellan, a former State Street Corp. executive, to 18 months in prison for his role in a scheme to defraud customers of State Street’s Transition Management line of business.
Earlier this year, McLellan was found guilty of applying hidden commissions to billions of dollars of securities trades for these customers.
The criminal conviction is based on substantially the same conduct alleged in a parallel enforcement action brought by the Securities and Exchange Commission.
The SEC’s complaint against McLellan, which was filed on May 13, 2016, alleges that between February 2010 and September 2011, McLellan led a scheme to add secret commissions to securities trades performed for at least six clients of State Street’s “transition management” business. That business helps institutional clients move their investments between asset managers or to otherwise restructure large investment portfolios.
The complaint further alleges that these commissions were charged in addition to fees the clients had expressly agreed to pay the bank, and that McLellan took steps to conceal the commissions from the clients and others within State Street.
The SEC’s litigation is ongoing.
Co-Owners of Defunct New York-Based Private Equity Firm Charged With Defrauding Clients
The SEC charged the two co-owners of a now-defunct New York-based private equity firm with defrauding the firm’s advisory clients and pocketing millions in fees.
One of the co-owners consented to a judgment, which was entered on Oct. 19, without admitting or denying the allegations, permanently enjoining him from violating the antifraud provisions of the federal securities laws.
