FINRA Bars Former Morgan Stanley Manager for Failing to Supervise Abusive Broker

FINRA Bars Former Morgan Stanley Manager for Failing to Supervise Abusive Broker

The Financial Industry Regulatory Authority (FINRA) has barred former Morgan Stanley branch office manager Terry McCoy from working in a supervisory capacity in the securities industry. FINRA found that McCoy failed to properly supervise a broker who was engaging in abusive trading misconduct in customer accounts.  FINRA also fined McCoy $75,000.

Branch office managers are the first line of defense to protect investors from abuse by stockbrokers. This is one of the rare circumstances we are aware of where a securities regulator has firmly and aggressively disciplined a supervisor for failing to stop stockbroker abuses.

McCoy Fails to Supervise Broker Who Churned Customer Accounts

FINRA alleges that the former manager of Morgan Stanley’s Palm Harbor, Florida office failed to supervise broker Ami Forte, who churned the accounts of a wealthy, elderly customer and made trades without receiving the customer’s proper authorization. The customer was the founder of the Home Shopping Network.

According to FINRA, Terry McCoy failed to supervise Ami Forte and another broker who made excessive and unsuitable trades in six of customer Roy M. Speer’s accounts. FINRA also found that the broker made many of the trades without receiving proper authorization from Mr. Speer. According to FINRA, many of the trades involved moving in and out of positions in the same securities in a matter of a few weeks or months. This is one of the tell-tale signs of abusive stockbroker trading that any reasonable supervisor should catch and stop.

The activity included more than 2,000 trades from September 2011 through July 2012. The excessive trades generated more than $9 million in commissions.

During the time of the trading, Mr. Speer reportedly was suffering from various physical ailments and dementia. A Florida court declared him legally incompetent in July 2012 and he died in August 2012.

FINRA said in its formal letter of acceptance, waiver and consent that Forte’s supervisor, McCoy, was aware of Mr. Speer’s deteriorating condition, but did nothing to stop the excessive trading, including failing to detect at least 300 trades that were entered less than five minutes after the trading desk proposed the trades.

Excessive Trading Leads to Arbitration Award of $34 Million

Terry McCoy, along with Ami Forte and Morgan Stanley, was named in a multi-million-dollar FINRA arbitration claim by Mr. Speer’s estate in March 2016. The FINRA arbitration panel awarded $34 million to the estate, finding that McCoy, Forte, and Morgan Stanley were jointly liable for breach of fiduciary duty/constructive fraud, negligence, negligent supervision, unauthorized trading, and unjust enrichment.

Of the $34 million arbitration award, almost $32.8 million was awarded in compensatory damages to the estate and an affiliated foundation. The arbitrators also awarded $1.5 million in costs, while attorneys’ fees will be determined later in court. The Speer estate originally sought more than $476 million.

The panel also found that Morgan Stanley violated a Florida law that prohibits exploitation of vulnerable adults.

Broker Fired, Supervisor’s Employment Terminated

Ami Forte was fired by Morgan Stanley a few days after the arbitration award was announced. Complicating the story, Forte was alleged to be in a multi-year affair with Speer, who was 80 when he died in 2012. Shockingly, Forte was able to find another job in the brokerage industry. She is now registered with Pinnacle Investments.

According to FINRA’s BrokerCheck report, Terry McCoy left Morgan Stanley on November 1, 2016, by mutual agreement after 17 years with the firm.

Have You Lost Money Investing with Morgan Stanley?

If you lost money investing with Morgan Stanley, including the Morgan Stanley office where Terry McCoy was the supervisor, or think you may be a victim of stockbroker misconduct, contact an experienced investment fraud attorney today.

Speak with an Investment Fraud Attorney Today

If you are looking for an investment fraud attorney to review your rights and options, the investment fraud lawyers at Dimond Kaplan & Rothstein, P.A. represent individual and institutional investors who have lost money as a result of securities fraud or stockbroker misconduct.

Our AV-rated* lawyers have extensive experience litigating a broad range of investment disputes and we will aggressively pursue claims to recover your investment losses. We’ve recovered more than $100 million in assets lost to investment fraud, stockbroker misconduct and more.

Contact an investment fraud attorney at Dimond Kaplan & Rothstein, P.A. to schedule an appointment for a FREE case evaluation.

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