Initiated By
FINRA
Allegations
Forte was named a respondent in a FINRA complaint alleging that she, and an employee of hers, exploited an elderly customer suffering from severe cognitive impairment by engaging in qualitatively and quantitatively unsuitable trading in the customer's accounts, generating more than $9 million in commissions. The complaint alleges that Forte controlled the trading in the customer's accounts and bought and sold the same securities multiple times over a short period, which resulted in higher commissions and provided little or no economic benefit to the customer. Often these securities were income-producing bonds, including municipal bonds, intended for customers with long-term investment time horizons, and carried substantial commissions. Forte also effected short-term purchases and sales of bonds without having reasonable grounds to believe that such purchases and sales were suitable for the customer in view of the nature and frequency of the transactions and the transactions costs incurred, and in light of the customer's financial situation, investment objectives, circumstances and needs. By excessively trading and churning in the customer's accounts, Forte willfully violated Securities Exchange Act of 1934 (Exchange Act) Section 10(b) and Exchange Act Rule 10b-5, willfully violated MSRB Rules G-17 and G-19, and violated FINRA Rules 2020 and 2010. The complaint also alleges that Forte violated FINRA Rule 2010 and willfully violated MSRB Rule G-17 by aiding and abetting her employee's violation of Exchange Act Section 10(b), Exchange Act Rule 10b-5, and FINRA Rule 2020. Forte knowingly or recklessly rendered substantial assistance by hiring the individual for the purpose of executing the excessive trading in the customer's accounts, assisting him in exercising control over the customer's accounts by exploiting her personal and business relationships and directing and condoning the excessive trading activity that the individual executed. The complaint further alleges that Forte willfully violated MSRB Rule G-17 by engaging in unethical business conduct. Forte used her position of trust and confidence to exploit the customer while he was suffering severe cognitive impairment and to generate excessive commissions from his accounts.
Resolution
Decision & Order of Offer of Settlement
Bar
Bar (Permanent)
Registration Capacities Affected
All Capacities
Duration
Indefinite
Start Date
10/21/2019
Regulator Statement
Without admitting or denying the allegations, Forte consented to the sanction and to the entry of findings that she willfully violated MSRB Rule G-17 by aiding and abetting her employee's excessive trading and churning of an elderly customer's accounts in violation of Securities Exchange Act of 1934 ("Exchange Act") Section 10(b), Exchange Act Rule 10b-5, and FINRA Rule 2020. The findings stated that Forte, and the employee, exploited the elderly customer that was suffering from severe cognitive impairment by engaging in quantitatively unsuitable trading in the customer's accounts, generating more than $9 million in commissions. The findings also stated that Forte and the employee met and spoke frequently with the customer and knew he suffered severe cognitive impairment. Yet, Forte and the employee never reported the customer's condition to their member firm. Instead, Forte and the employee increased their level of trading in the customer's accounts in the months after the customer's diagnosis. In addition, many of these transactions involved unsuitable short-term trading of long-term investment products, such as income-producing bonds with long-term maturity dates. Forte knowingly or recklessly rendered substantial assistance to her employee's violations by hiring him for the purpose of executing the excessive trading in the customer's accounts, assisting him in exercising control over the customer's accounts by exploiting her personal and business relationships, and resulting position of trust and confidence, with the customer and directing and condoning the excessive trading activity that the employee executed. Forte was aware that her role was part of an overall activity that was improper.