SEC Charges Former Morgan Stanley Broker Michael Carter with Fraud
Posted on Monday, October 21st, 2019 at 3:19 pm
Erez Law is currently investigating former Morgan Stanley broker Michael Carter (CRD# 3232017) who was charged by the SEC with fraud. Carter was registered with Morgan Stanley in McLean, Virginia from 2011 to 2019, when he was terminated regarding, “FA was terminated after allegations he misappropriated client funds.”
In October 2020, the state of Maryland barred Carter and sanctioned him to pay a $220,000 civil and administrative penalty and fine regarding allegations that, “Respondent violated the antifraud provisions of section 11-301 of the Securities Act by, among other things, misappropriating millions of dollars from his clients’ accounts for his own personal benefit, misrepresenting or omitting to disclose material facts to his clients and falsifying his clients’ account statements. Respondent violated the dishonest and unethical provisions of section 11-306 of the Securities Act by, among other things, misappropriating millions of dollars from his clients’ accounts for his own personal benefit.”
In July 2020, the Securities and Exchange Commission (SEC) charged Carter with fraud for stealing $6 million from brokerage customers and an elderly advisory client. According to the SEC complaint, Carter “ falsified internal documents in order to effect dozens of unauthorized wire transfers, totaling millions of dollars, from the accounts of brokerage customers to his personal bank account… to generate some of the funds that he misappropriated, Carter sold securities without customer authorization. As alleged, Carter employed various methods to conceal his misconduct from his brokerage customers, including diverting account statements to addresses he controlled. The complaint further alleges that Carter made almost $1.5 million in unauthorized transfers from the accounts of an elderly advisory client, sending nearly $1 million to himself, and using some of the remainder to repay funds he had taken from a brokerage customer. Carter also allegedly misappropriated funds from the client that originated from 529-plan college savings accounts held at another financial institution for the benefit of the her grandchildren. The complaint alleges that Carter used the funds he misappropriated from his customers and client to support his lavish lifestyle.” The SEC is seeking injunctive relief, the return of allegedly ill-gotten gains plus prejudgment interest, and a civil penalty.
The U.S. Attorney’s Office for the District of Maryland announced criminal charges against Carter; Carter pled guilty to those charges.
In February 2020, FINRA suspended Cater indefinitely after he “failed to comply with an arbitration award or settlement agreement or to satisfactorily respond to a FINRA request to provide information concerning the status of compliance.”
In September 2019, FINRA barred Carter after he “consented to the sanction and to the entry of findings that he failed to provide documents and information requested by FINRA during the course of an investigation initiated after FINRA received an external tip relating to allegations of misconduct that were ultimately contained in a Form U5 filed by his member firm.”
Carter has been the subject of five customer complaints between 2019 and 2020, according to his CRD report:
June 2020. “Client’s attorney alleges, inter alia that funds were misappropriated from the client’s account and that shares of stock were sold without authorization. 2015 – 2016.” The customer sought $73,458 in damages and the case was settled for $16,731. The complaint was regarding common and preferred stocks.
November 2019. “Complaint from client’s attorney alleging misappropriation by former FA from client’s account. 10/01/2012-07/31/2019.” The customer sought $6,838,155.55 in damages and the case was settled for $1,300,000. The complaint was regarding a non-broker-dealer affiliate product.
October 2019. “Client did not authorize withdrawals in the account that took place between 2/2007-08/2014.” The customer sought $4,000,000 in damages and the case was settled for $3,193,500. The complaint was regarding a non-broker-dealer affiliate product.
September 2019. “Client was unaware of withdrawals in the account that took place between 6/2015 AND 9/2017.” The case was settled for $676,174.01. The complaint was regarding a non-broker-dealer affiliate product.
September 2019. “Client’s POA agent verbally alleged that a Liquidity Access Line was opened without authorization and certain withdrawals were unauthorized – December 2017 through May 2019.” The case was settled for $1,357,841.68. The complaint was regarding a non-broker-dealer affiliate product.
Pursuant to FINRA Rules, member firms are responsible for supervising a broker’s activities during the time the broker is registered with the firm. Therefore, Morgan Stanley may be liable for investment or other losses suffered by Carter’s customers.
Erez Law represents investors in the United States for claims against brokers and brokerage firms for wrongdoing. If you have experienced investment losses, please call us at 888-840-1571 or complete our contact form for a free consultation. Erez Law is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies on a contingency fee basis.