Fortrend Securities in client standoff over share holdings

Melbourne broker Fortrend Securities is facing multiple regulatory investigations amid a standoff with clients, who claim it liquidated their holdings when they sought to leave.

Joe Forster, managing director of Fortrend Securities in Melbourne.

A Melbourne broker is facing multiple regulatory investigations amid a standoff with clients, who claim he liquidated their holdings when they sought to leave.

The Australian understands the corporate regulator and US markets regulator the Financial Industry Regulatory Authority have both opened probes into Fortrend Securities.

This is in addition to disputes body the Australian Financial Complaints Authority, which has also received reports about Fortrend amid concerns its managing director, Joe Forster, threatened to close accounts and liquidate their holdings.

The Australian is aware that multiple investors have complained to regulators about Fortrend’s conduct after they sought to leave the brokerage.

One investor showed The Australian correspondence from Mr Forster warning that the brokerage firm would close his accounts and liquidate “all your existing positions” if he was unable to secure a new broker within 30 days.

Correspondence between Mr Forster and one client notes Fortrend would liquidate their holdings if they failed to “resolve” their attempts to leave. However, this investor told The Australian that, despite multiple attempts to have Fortrend transfer the shares, the Melbourne-based broker repeatedly refused to make the transaction or repeatedly supplied incorrect documents, which blocked any move.

Clients seeking to transfer balances can use either the ACATS or DTC transfers system to move shares between brokerages, without being forced to sell those shares and incur a tax obligation.

Fortrend, which Mr Forster set up in 1992, offers trades in US equities, bonds and other financial products under its licences, which allow it to trade on behalf of clients in Australia and the US.

The Australian is aware of several clients who are trying to force Fortrend to move their shares, but allegedly have been warned by Mr Forster that he would sell their shares.

Several investors have also allegedly seen their shares sold by Fortrend, leaving them to face tax losses in direct opposition to their desires to retain their shareholdings and transfer the portfolios.

Fortrend, set up by Joe Forster in 1992, offers trades in US equities, bonds and other financial products. Picture: David Crosling

As part of these transactions, investors allege Fortrend also clipped their balances, causing them to pay Mr Forster’s firm thousands of dollars in unwanted fees. Brokers told The Australian that Fortrend’s moves to liquidate balances may amount to an unauthorised discretionary transaction, without the permission of clients.

The Australian is aware FINRA is investigating Mr Forster, as is the Australian Securities & Investments Commission, in what may be the second time Fortrend has faced legal action over its conduct.

An ASIC spokesman declined to comment, citing confiden­tiality.

The Australian is not suggesting any wrongdoing, only that regulators are investigating complaints against Fortrend and Mr Forster.

ASIC previously delivered Fortrend orders in 2008 after finding a long list of breaches by the broker, saying it repeatedly failed to comply with its Australian Financial Services Licence.

This resulted in Mr Forster and Fortrend being put on a good behaviour order, requiring the firm to undertake a remediation plan and improve its disputes resolution systems.

When The Australian sought to put questions to Mr Forster regarding this matter, it received a legal notice from his lawyers Cornwalls, which is also representing the businessman in a case against two former employees.

Cornwalls principal Matthew Kennett said the questions put to Mr Forster would damage Fortrend’s reputation if published, and saying he had not been given enough time to respond.

The letter, sent on March 15, said Mr Forster had not been given time to outline the potential defamatory implication of the allegations put to him, but said Cornwalls would soon follow up.

No further letter had been received at the time of publication.

However, Mr Kennett denied the allegations on behalf of Mr Forster and Fortrend and denied any improper activity or fraudulent intent.

Mr Kennett said Fortrend was currently before the Federal Court, adding that if allegations were published it would have further negative effects on Mr Forster and his business.

Shaw and Partners senior portfolio managers Stephen Lyle and Christopher Wollermann.

The legal notice also said allegations may have been made by people associated with the legal proceedings.

Following this notice, Mr Forster bombarded this journalist with calls, saying he had been “set up”.

The looming investigations come as Fortrend and Mr Forster are set to front the Federal Court in May in an attempt to take ­action against two former employees of the broker.

Mr Forster launched litigation against former Fortrend staff members Christopher Wollermann and Stephen Lyle.

Fortrend claims the pair’s actions cost the firm up to 43 clients, who left the broker in the wake of the departure of the two men after they joined rival broker Shaw and Partners.

In that case, the court will also hear claims from Mr Wollermann that Mr Forster deducted $46,800 from his pay for travel and ­entertainment costs.

A March trial of the fight was vacated after Mr Forster sacked his lawyers.

Mr Forster was also hit with restraining orders in December after an altercation at the Shaws office.

Originally published as Fortrend Securities in client standoff over share holdings