Correction: The following article has been corrected to clarify that Finra charged Ami Forte with aiding and abetting churning but not with churning.
Finra barred former Morgan Stanley broker Ami K. Forte for her role in churning the accounts of the millionaire co-founder of Home Shopping Network while he suffered from dementia.
The action was
part of a settlement over a lawsuit by the Financial Industry Regulatory Authority Inc.
last December.
Finra also barred Charles Joseph Lawrence, who was on Ms. Forte's team at Morgan Stanley in Palm Harbor, Fla., for his
role in the scheme. Mr. Lawrence was most recently a broker with R.F. Lafferty & Co.
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Finra found that from September 2011 through June 2012, Ms. Forte aided and abetted in 2,800 unsuitable trades that resulted in $9 million in commissions in the account of a client identified as "RS" in the lawsuit. The client was Roy Speer, who cofounded the Home Shopping Network and died in August 2012.
The trading, which was executed by Mr. Lawrence at Ms. Forte's direction, continued while Mr. Speer was hospitalized from June 20 to June 29, 2012, with $14 million in transactions accumulating in the account. Finra alleged that Ms. Forte, who once had a romantic relationship with Mr. Speer, took advantage of him while he was suffering from dementia.
Neither Ms. Forte nor Mr. Lawrence admitted nor denied wrongdoing. Finra dropped a churning charge against Ms. Forte as part of the settlement, according to her attorney, Robert J. Pearl.
"Protection of senior and vulnerable investors is a top priority for Finra," Jessica Hopper, senior vice president and acting head of Finra's Department of Enforcement, said in a statement. "Churning the account of an elderly customer who suffered from severe cognitive impairment is an egregious violation of the high ethical standards to which Finra holds all associated persons."
In a statement, Ms. Forte said the only remaining Finra charge involves one of Mr. Speer's Morgan Stanley accounts that was not overseen by her. She said Finra will not be pursuing her for monetary sanctions or restitution.
"I am pleased that we have been able to reach an amicable settlement with Finra to resolve this matter and to end potentially expensive and protracted litigation," Ms. Forte said in a statement. "As I have previously stated, I neither placed nor supervised any of the trades that Finra has deemed inappropriate."
In 2016, Mr. Forte was fired by Morgan Stanley when Mr. Speer's widow sued the firm for $400 million. In March 2016, a Finra arbitration panel awarded $34 million to the estate of Mr. Speer for its claim against Morgan Stanley for churning Mr. Speer's account.
In her statement, Ms. Forte said she is suing Morgan Stanley for wrongful termination. Mr. Pearl said Finra should have taken enforcement action against Morgan Stanley.
"Finra alone can explain why it gave Morgan Stanley, a firm which made many millions of dollars off the Speer accounts and was found liable in the underlying Speer arbitration proceeding, a free pass but filed charges against the Morgan Stanley personnel who were relying on Morgan Stanley's management to properly supervise these accounts," Mr. Pearl said in a statement.
A Finra spokeswoman declined to comment on Mr. Pearl's assertion that the regulator took it easy on Morgan Stanley.
