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Morgan Stanley Loses $34 Million FINRA Arbitration

By Erwin J. Shustak, Esq.  of Shustak Reynolds & Partners, P.C. posted on Wednesday, April 6, 2016.

A California FINRA arbitration panel ordered Morgan Stanley, a branch manager and its former superstar broker, Ami Forte, to pay $34 million to the estate of Roy M. Speer, one of the co-founders of Home Shopping Network, for churning Mr. Speer’s brokerage accounts.  The award is significant not only due to its size, but because Ami Forte had been one of Morgan Stanley’s highest producing, “superstar” brokers, who had been based in Morgan’s Palm Harbor, Florida office.

The story, however, has a salacious side to it.  Roy Speer’s wealth back in 2000 topped $1 billion and he was on the Forbes 400 list of richest Americans. In 2012, Roy Speer died at the age of 80 after years of declining physical and mental health.  He was survived by his wife of 52 years, Lynnda Speer, now 75.  According to public reports, Lynnda Speer contends that Morgan Stanley and Forte engaged in excessive trading, unauthorized use of discretion and abused their fiduciary duty. Roy Speer's accounts managed by Morgan Stanley and Forte ranged from $150 million to $200 million in size depending on the stock market's value.

During the last five years of Speer's life, says Speer’s attorney, Forte and her colleagues at Morgan Stanley put through approximately 12,000 unauthorized trades in Roy Speer's accounts — including the Roy M. Speer Charitable Foundation and the Speer Family Trust — generating commissions of nearly $40 million, an average of 200 trades every month for five years.

Speer alleged that Forte manipulated the accounts during a years long affair she had with Roy Speer, prior to his death in 2012.

A Morgan Stanley webpage for Forte, taken down during the FINRA arbitration, called her "one of the few female members of the Morgan Stanley's Chairman's Club, qualifying consistently since 2001."  The bank's Chairman's Club is for top-producing wealth advisors. Forte was also named in Barron's as a top financial advisor for several years, according to an archived version of her Morgan Stanley web page.

According to the publicly available award details, found on FINRA’s Broker-Check website portal, the FINRA panel determined that Forte is jointly and severally liable, along with Morgan Stanley and her branch manager, and was directed to pay the Speer estate compensatory damages in the amount of $32,840,000.00, plus interest.

Shustak Reynolds & Partners, P.C.  focuses its practice on the securities industry and matters affecting broker-dealers, registered representatives and the financial services sector. For more information, contact Erwin J. Shustak, managing partner, at [email protected], or call 800.496.5900 for a free consultation.

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