Tag Archives: Smith Barney

The Fraud of Michael Barry Carter

If you were a client of Morgan Stanley broker Michael Barry Carter, better known as Mike Carter, please call 1-866-817-0201 for a free and confidential consultation to determine whether you have been a victim of fraud.

The Securities and Exchange Commission on Monday, July 20, 2020, charged a former Morgan Stanley representative with stealing approximately $6 million from brokerage customers and an elderly investment advisory client.

Investors have recourse when investment professionals turn bad.

Investors have recourse when investment professionals turn bad.

Mike Carter was a financial advisor in the McLean, Virginia office of a Morgan Stanley.  He falsified internal documents in order to effect dozens of unauthorized wire transfers, totaling millions of dollars, from the accounts of brokerage customers to his own personal bank accounts.  

“As a financial advisor, Carter was entrusted with millions of dollars belonging to his brokerage customers, his advisory clients, and their families,”  stated SEC’s New York regional office director in a press release. “As alleged in our complaint, Carter instead took advantage of that trust for his personal gain.”

Morgan Stanley also failed to adequately monitor money transfers to accounts of its brokers.  Adequate supervision would have stopped most, if not all of these transfers.

Carter attempted to hide his fraud with the circulation of false account statements to his investors.  He then used the stolen funds to pay his credit cards and his mortgage.

Carter has been charged by federal authorities with wire fraud and other criminal counts.

Diones LaCerte Investment Fraud Investigation

We are currently investigating the actions of Colorado Springs broker Elaine Diones LaCerte.  Ms. LaCerte was most recently a financial advisor for Morgan Stanley.  If you information or would like to discuss a potential claim that you have concerning Ms. LaCerte, please call 303-300-5022 in Colorado or 1-866-817-0201 outside of Colorado to speak to a Colorado licensed attorney.  Initial consultation is free and confidential.  Representations are handled on a contingency basis where attorney fees are paid from recovery.

Ms. LaCerte has recently been alleged by FINRA regultators to have committed significant fraud. Between July 1,2012 and December 31,2014, LaCerte engaged in an unsuitable pattern of short-term trading of Unit Investment Trusts (“UITs”) in 107 of her customers’ accounts.  This is a significant type of fraud perpetrated on a large number of investors.   Diones LaCerte settled the charges without admitting or denying fault.

The regulatory settlement included a six-month suspension for Ms. LaCerte.  This suspension runs until September 2018.

The actions of LaCerte constitute an unsuitable pattern of short term trading of UITs in 107 customer accounts. This is similar to churning an account.  Short term trades of a high commission and high cost investment puts the advisor’s financial gain ahead of that advisor’s investors.

UITs typically carry significant upfront charges, such as costs and commissions, and as with mutual funds, short-term trading of UITs is generally improper. During the Relevant Period, in connection with these 107 customer accounts, LaCerte repeatedly recommended that the customers purchase UITs and then sell these products well before their maturity dates.

The primary issue brought by FINRA concerns the selling of UITs less than two years after purchase.  The majority of the UlTs that LaCerte recommended had maturity dates of at least 24 months. Nevertheless, LaCerte repeatedly recommended that her customers sell their UIT positions less than one year after purchase. Indeed, the average holding period for the UITs purchased in these customers’ accounts was less than 300 days. In addition, on more than 100 occasions, LaCerte recommended that her customers use the proceeds from the short-term sale of a UIT to purchase another, similar UIT. LaCerte’s recommendations caused the customers to incur unnecessary sales charges, and were unsuitable in view of the frequency and cost of the transactions.

investingstockphoto 1Diones LaCerte has a significant history of customer complaints prior to the current regulatory action.  The CRD of Ms. LaCerte, the record a financial advisor has with FINRA regulators, indicates that she has received many customer complaints concerning the sale of unsuitable investments, and these complaints have led to five investor lawsuits brought or threatened in the past three years.

The problems with LaCerte are just part of wide-spread supervisory problems at Morgan Stanley.  In September 2017, the Financial Industry Regulatory Authority (“FINRA”) fined Morgan Stanley $13 million for failing to supervise UIT sales.  FINRA is the regulatory that, under the oversight of the SEC, is in charge of regulating securities brokerages.  In its finding, FINRA found that from January 2012 through June 2015, hundreds of Morgan Stanley brokers executed short-term UIT rollovers, where one UIT was sold to purchase a new UIT, including UITs rolled over more than 100 days before maturity, in thousands of customer accounts.”  

We believe that these problems extend beyond the 2012-2015 time frame.  Please call for consultation.