While many say you can’t control “love” there is a serious ethical problem when you sleep with your client. To me ethics in the financial services profession were violated when Ami Forte of Morgan Stanley elected to have a romantic relationship with client Roy Speer – co-founder of the Home Shopping Network. Speer was once listed on the Forbes 400 list of richest Americans. Stanley on the other hand made tens of millions in fees buying and selling on his behalf. Recognized as one of the few females who earned the distinction of being in the Morgan Stanley’s Chairman’s Club, she was later determined to be guilty of elder exploitation, breach of fiduciary duty, constructive fraud, unauthorized trading and churning. Financial Services Ethics violation? Absolutely from an ethics perspective!
The Back Story:
While Speer was alive it would seem that all in this love nest was going well. After his death in 2012 things got a bet nasty. His widow claimed that Forte took advantage of her elderly husband for the purpose of earning millions in commissions. His widow, after gaining control of her late husband’s brokerage account, claimed that Forte executed roughly 12,000 unauthorized trades. Lynnda Speer’s suit with FINRA claims that Morgan Stanley “took advantage” of the elderly Speer, who died at age 80.
In an Associated Press Interview the following was stated by Forte:
“I cared deeply for this person,” Forte said, during an exclusive interview with The Associated Press on Monday. “The type of relationship we had changed over the years. We were very, very dear friends. It changed to a very dear friendship, there was a time when it was more than that.”
According to the published report:
A three-person arbitration panel ruled in March that Morgan Stanley, Forte and a Morgan Stanley branch manager were guilty of elder exploitation, breach of fiduciary duty, constructive fraud, unauthorized trading and churning Roy Speer’s accounts, along with negligence, negligent supervision and unjust enrichment. The panel awarded Lynnda Speer $32.8 million, plus costs and legal fees likely to be several million dollars more.
But That’s Not All…
After being fired which prevented Forte from receiving millions in deferred compensation plus other former employment benefits, Forte is fighting back. She says in her multi-million dollar securities arbitration case before FINRA that Morgan filed a “fabricated” Form U-5 about her discharge, making it unlikely that she’ll ever work as a financial advisor again, and has brought a multi-million dollar wrongful termination and defamation arbitration case against the firm.
In an article Forte states:
“It’s just not right,” Forte said. “I have been a loyal employee, I loved that company. I’ve done everything for them. When times were tough, I rallied the troops. There were many, many people in Morgan Stanley who very much knew about that relationship for years and years and years,” Forte said.
Forte’s lawyer, Robert Pearl adds “that there was no industry rule – or Morgan Stanley policy – that prohibited a relationship between a broker and a customer.”
Do Ethics Have To Be Spelled Out?
Is there any doubt that this is a financial services ethics violation? A suit here an arbitration hearing there…they are of little concern to me. What does concern me is when there is a financial services ethics violation. Morgan Stanley’s Code of Ethics and Business Conduct states: “Avoid any investment, activity or relationship that could, or could appear to, impair your judgment or interfere with your responsibilities on behalf of Morgan Stanley, our clients and our shareholders.”
I feel like Forest Gump when I say this, “I may not be a smart man, but doesn’t a romantic relationship with a client seem to push the edge of a ‘relationship that could, or could appear to impair your judgment’?” A can’t help be see that there was a financial services ethics violation when Ami Forte became romantically involved with Roy Speer. And, if Morgan Stanley knew and did nothing about it, it would seem that there was a culture of looking the other way and ethics be damned. But for now the lawyers can make that judgment. One thing that is true, is it seemed to take the action of Lynnda Speer to get any traction on this financial services ethics violation.
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