Former Morgan Stanley Advisor Pleads Guilty to $6M Fraud

"After learning that his fraud had been discovered, in October 2019, Carter also repaid the nonprofit organization for its loss," the DOJ states. Of the total amount repaid, $1.1 was repaid through transfers Carter made from other victim accounts.

As part of his plea agreement, Carter will be required to pay $4.4 million, an amount equal to the net proceeds he obtained.

"As alleged, Carter employed various methods to conceal his misconduct from his brokerage customers, including diverting account statements to addresses he controlled," the complaint states.

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The SEC 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 allegedly misappropriated about $345,000 from the client that originated from 529 college savings plan accounts held at another financial institution for the benefit of her grandchildren, according to the complaint.

The complaint alleges that Carter used the funds he misappropriated from his customers and client for credit cards, mortgage payments and a luxury car.

"As a financial advisor, Carter was entrusted with millions of dollars belonging to his brokerage customers, his advisory clients, and their families," said Marc Berger, director of the SEC's New York Regional Office, in a statement. "As alleged in our complaint, Carter instead took advantage of that trust for his personal gain."

The SEC's complaint, filed in the U.S. District Court for the District of Maryland, charges Carter with violations of the anti-fraud provisions of the Securities Exchange Act of 1934 and the Investment Advisers Act of 1940. The SEC is seeking injunctive relief, the return of allegedly ill-gotten gains plus prejudgment interest, and a civil penalty.

In a statement, Morgan Stanley said it "is strongly committed to the protection of client assets, and to act quickly when fraudulent activity is uncovered."

The advisor "was terminated as soon as his activity came to our attention, and we immediately reported the matter to the appropriate law enforcement and regulatory authorities and have been cooperating with their investigations," the wirehouse said.

"There were a limited number of clients impacted, and any money misappropriated by the advisor was returned," it explained.

— An earlier version of this story misstated Carter's broker-dealer affiliation. This has been corrected.