Michael Barry Carter, a former Morgan Stanley (MS) broker is facing time in prison after pleading guilty of investment fraud. Carter was charged in a scam in which he defrauded five customers millions of dollars over more than 12 years. Among them is an elderly client who was defrauded of more than $6 million. After the scam was uncovered, Carter started taking money from investors to pay to repay the victims.
Carter is set to be sentenced on November 9. However, he is expected to be given a lower sentence than maximum according to the plea agreement with the Department of Justice. According to the DOJ documents, Carter made several unauthorized cash transfers from clients’ accounts during the period between October of 2007 and July of 2019.
Carter transferred clients’ funds to his accounts
Carter transferred the unauthorized funds to his accounts in more than 50 transactions. In addition, he took an $800k loan taken under a customer’s name without his knowledge or permission. Carter also pleaded guilty to embezzlement of over $50k from a non-profit sports organization. He faces up to 25 years in prison. As part of the plea agreement, he will pay back the net proceeds obtained from the victims.
‘For over 12 years, Michael Carter perpetrated a brazen scheme that defrauded victim account holders whose investments he was supposed to protect,’ said US Attorney for the District of Maryland Robert Hur.
The fraud was discovered when a daughter to an elderly client tried to secure a loan through Morgan Stanley to relocate the mother to an assisted living facility. At this time, she discovered that the client’s name, referred to by the DOJ as Victim 1, had been used to take out an $800k loan.
Michael Carter has a strong profile in the financial industry, having worked 18 years in the industry. Apart from Morgan Stanley, he has also worked as a broker for Ameriprise (AMP) for less than a year. He has also been an agent for Dean Witter Reynolds, Financial Network Investment Corporation, and Merrill Lynch.
According to information available on the BrokerCheck webpage of the Financial Industry Regulatory Authority, Morgan Stanley conducted an additional investigation in which it uncovered that proceeds from the loan were channeled to Carter’s bank account. Carter, who joined Morgan Stanley in September 2006, was fired in July 2019 following the conclusion of investigations.
Why brokerage firms need to supervise their agents
Brokerage firms are required by law to supervise the activities of their agents. Liability from loss due to fraud or negligence may be transferred to the firm in case the agent is found guilty of an offense while representing the company. In this case, Morgan Stanley could face a series of lawsuits for letting such fraud to go on for years undetected. The case will also raise questions on how many other brokers and investment advisers may have gone unnoticed.
Fired Ameriprise Broker Bryant Caveness Accused of Stockbroker Fraud & Ethics Violation Allegations
The Financial Industry Regulatory Authority (FINRA) has barred Bryant Edwin Caveness, an ex-Ameriprise Financial Services stockbroker after he stopped cooperating in the self-regulatory organization (SRO)’s probe into his firing by the firm.
In his termination letter, the brokerage said it had fired him after involving in stockbroker fraud and misconduct. Caveness’s alleged stockbroker fraud actions may have also involved old customers who may have cleared with the brokerage without noticing. The ex-broker signed an acceptance letter, waiver, and consent (AWC) agreeing to the sanctions but did not deny or admit the charges. SRO initiated additional investigations to find out if he adds defrauded older clients.