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FINRA Bans Two Registered Representatives for Churning Accounts of Elderly Client with Alzheimer’s.

On October 21, 2019, FINRA announced that it had barred Ami Forte and Charles Lawrence of Florida for their roles in churning accounts belonging to a 79-year-old customer who suffered from severe Alzheimer’s and dementia.  According to the Complaint, Forte and Lawrence engaged in unsuitable and excessive trading, specifically in the 10 months preceding his death, the Forte group effected more than 2,800 trades in the victim’s accounts generating around $9 million in commissions.  Over half of these transactions involved short-term trading in long-maturity bonds, including municipal bonds, intended for customers with long-term investment horizons.  

The investigation revealed that Forte first met the customer (referred to as RS) in the late 90s when they began a romantic relationship.  Forte, who was the broker of record in the accounts, and maintained near daily contact with the customer, used her position of trust and confidence to exploit RS and generate excessive commissions from his accounts.  During the relevant period, RS held approximately $192 million in six accounts in Morgan Stanley.  In 2001, Forte established the Forte Group at Morgan Stanley, which she headed as Senior Vice President.  Lawrence joined the Forte Group at its inception, and by 2009, he was mainly entering the Forte Group’s day to day trades in the RS accounts.  It’s worth noting, that RS accounts generated approximately 94 percent of Forte’s commission revenues.  On the other hand, Lawrence did not received commissions from the trading activity in the RS Accounts.  He was paid an annual salary plus bonuses.  

According to the settlement, Forte and Lawrence met and spoke frequently with RS and knew he suffered severe cognitive impairment.  It states that multiple treating physicians, some as early as 2008, determined that RS suffered from dementia or Alzheimer’s or both.  During the investigation period, at least four separate physicians on approximately five occasions diagnosed RS with severe cognitive impairment.  Forte and Lawrence exploited RS’s vulnerable mental and physical condition to unsuitability and excessive trade his accounts, it continued until shortly before RS’s death.  For instance, on June 20, 2012, RS entered the hospital for the final time before his passing in August 2012.  Despite being hospitalized and not in contact with anyone from the Forte Group, between June 20 and June 29, 2012, RS’s accounts had over $14 million in transactions.  Forte and Lawrence never reported RS’s condition to Morgan Stanley.  Instead, they increased their level of trading in RS’s accounts in the months after RS’s diagnosis.  

In settling this matter, Forte and Lawrence neither admitted nor denied the charges, but consented to the entry of FINRA’s finding.