Ex-Morgan Stanley Broker Admits To Criminal Investment Fraud, Faces SEC Charges
Michael Barry Carter, a former Morgan Stanley (MS) broker, has pleaded guilty to federal investment fraud and wire fraud charges involving a scam in which he defrauded five customers. This included at least one elderly client, of more than $6M. The scheme took place over 12 years. After his acts of broker fraud were uncovered, Carter took money from other investors to pay back his other victims.
Morgan Stanley fired Carter last year. He also is now facing parallel Securities and Exchange Commission (SEC) civil charges.
If you suffered investment losses while working with former Morgan Stanley broker, Michael Barry Carter or any other broker from this firm, our broker fraud lawyers at Shepherd Smith Edwards and Kantas (SSEK Law Firm) would like to offer you a free consultation to explore your options. We represent investors nationwide.
As A Financial Adviser, Carter Owed Customers a Fiduciary Duty
Carter, who spent 14 years as a Morgan Stanley broker, also was a financial adviser for the firm’s wealth management section. It was his fiduciary duty to serve the best interests of his clients above his own.
According to the statement of facts in his guilty plea, from at least 10/2007 to at least 7/2019, he made a number of unauthorized transactions from five customers’ accounts for his own benefit and to fund his lavish lifestyle.
In addition to about $5M in unauthorized funds transferred to his own accounts that were made during over 50 transactions, there was also an $800K loan obtained in one customer’s name without that person’s knowledge or consent. These happened as well as the embezzlement of more than $50K from a non-profit sports organization.
Now, Carter is facing up to 25 years in prison. As part of his plea deal, he must pay back the net proceeds he obtained from his victims.
On the same day that the US Department of Justice announced Carter’s guilty plea, the SEC filed parallel civil charges against him for misappropriating funds from the same Morgan Stanley brokerage customers and investment advisory client.
FINRA Barred The Ex-Morgan Stanley Broker in 2019
According to his BrokerCheck record, Michael Barry Carter worked 18 years in the industry. In between his time with Morgan Stanley, he spent less than a year as an Ameriprise (AMP) broker. He also previously was a broker for Merrill Lynch, Financial Network Investment Corporation, and Dean Witter Reynolds.
Carter has nine disclosures on his record, including his firing by Morgan Stanley, the SEC case, as well as a bar issued by the Financial Industry Regulatory Authority (FINRA) last year. Carter has five customer disputes noted, four of which have been settled and one that is pending, including:
- One customer dispute alleging the opening of a liquidity access line without permission, as well as unauthorized withdrawals from 2017 to 2019. That case was settled for nearly $1.4M.
- A second customer dispute alleging unauthorized withdrawals between 2015 and 2017 that was settled for over $676K.
- A third claim also alleging unauthorized withdrawals between 2007 and 2014, which was settled for almost $3.2M.
- A customer complaint accusing Carter of misappropriation that was resolved for $1.3M.
- Another customer dispute filed last month alleging misappropriation and shares of stock sold without authorization. The claimant is requesting over $73K in damages.
Failure to Supervise: Why This Is An Issue Investors Should Be Aware Of
Brokerage firms have a duty to properly supervise their registered representatives. For a broker or investment adviser to go years without detection while defrauding a firm’s customers is inexcusable and may be grounds for an investor claim to recover losses and other damages sustained. It also may speak to a wider problem in which other brokers and investment advisers at the firm may have gone unchecked.
SSEK Law Firm has pursued claims against the largest broker-dealers on Wall Street for their inadequate supervision and negligence and won, recovering many millions of dollars on behalf of thousands of investors. Contact us today if you suffered significant losses while working with any Morgan Stanley registered representative.