Morgan Stanley Advisor found Guilty of Churning, Having Affair with Married Client
Morgan Stanley financial advisor Ami Forte purportedly had more than a decade-long affair with client and co-founder of the Home Shopping Network, Roy Speer, and made 12,000 thousand unauthorized trades on Speer’s account and generated $40 million in fees, according to an Investment News report. Speer’s widow filed a FINRA arbitration proceeding against Forte as well as Morgan Stanley Wealth Management. She is alleging excessive trading, negligent supervision and unjust enrichment. Morgan Stanley’s annual financial report filed with the SEC in March, 2015, disclosed the pending arbitration claim, indicating the financial liability to be no more than $170 million.
What is Churning?
In general terms, in the securities industry churning is the illegal broker practice of conducting a high number of trades on a customer’s account for the simple purposes of generating commissions without regard for the customer’s investment goals. This excessive buying and selling often has no logical connection to any overarching investment strategy on behalf of the client. Churning can involve several types of investment instruments including stocks, bonds, and options, as well as commodities, among others. When churning occurs, the trading is often short-term and the funds are quickly reinvested. Not only is churning unethical, it can destroy an investment portfolio’s performance and also violates Securities & Exchange Commission (SEC) as well as the Financial Industry Regulatory Authority’s (FINRA) rules.
In March of 2016, an arbitration panel found in favor of Mrs. Spear and against Morgan Stanley and Forte, finding them guilty of elder exploitation, breach of fiduciary duty, constructive fraud, and churning and awarded $32.8 million.
FINRA is very concerned about financial advisors abusing their elderly customers. The front page of FINRA’s website includes a Securities Helpline for Seniors that is a toll-free number that senior investors can call to get assistance or raise concerns about issues with their accounts or investments.
Miami Investment Fraud Attorneys
While many financial investments are inherently risky, an investment advisor is prohibited from acting unethically with his or her clients’ money. If you believe you have been the victim of investment fraud, contact an experienced and skilled fraud investment attorney right away. The knowledgeable legal professionals at Carlson & Associates can provide you with an initial case evaluation and advise you of options under state and federal laws. Call (305) 372-9700 today for more information.