Reps banned for churning accounts of severely impaired client

Churning the accounts of an elderly, vulnerable client generated more than US$9 million in commissions in less than a year for a pair of now-banned reps, the Financial Industry Regulatory Authority (FINRA) says.

The U.S. self-regulatory organization announced that a pair of Florida-based reps, Ami Forte and Charles Lawrence, have been banned for churning the accounts of a 79-year-old customer who was suffering from a “severe cognitive impairment.”

FINRA found that between September 2011 and June 2012, the former reps’ firm, the Forte Group, carried out more than 2,800 trades in the client’s accounts, generating approximately US$9 million in commissions.

“This unsuitable and excessive trading continued until shortly before [the client’s] death,” it said. “Despite being hospitalized and not in contact with anyone from the Forte Group, between June 20, 2012 and June 29, 2012, [the] accounts had over US$14 million in transactions.”

Forte and Lawrence settled the allegations, without admitting nor denying the charges. They consented to the entry of FINRA’s findings.

“Protection of senior and vulnerable investors is a top priority for FINRA. Churning the account of an elderly customer who suffered from severe cognitive impairment is an egregious violation of the high ethical standards to which FINRA holds all associated persons,” said Jessica Hopper, senior vice president and acting head of FINRA’s enforcement division.

FINRA noted that it is reviewing the effectiveness and efficiency of its rules and administrative processes that aim to protect senior investors from financial exploitation.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.