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Morgan Stanley to pay $15M SEC fine to settle 4 financial advisors’ theft charges

The financial services firm failed to detect “hundreds” of instances when former employees misappropriated client funds because it did not have a reasonable system in place, said the Securities and Exchange Commission.

By Lynn Cavanaugh | December 10, 2024 at 01:39 PM
Morgan Stanley offices in Baltimore, MD. Photo: Diego M. Radzinschi/ALM

Morgan Stanley has agreed to pay the Securities and Exchange Commission (SEC) a $15 million penalty, with failing to reasonably supervise four investment adviser and registered representatives in its Smith Barney unit who stole millions of dollars of advisory clients’ and brokerage customers’ funds and for failing to adopt policies and procedures reasonably designed to prevent and detect such theft.

The four advisors, located in Texas and California – Michael Carter, Chingyuan “Gary” Chang, Douglas McKelvey and Jesus Rodriguez – “collectively, misappropriated millions of dollars from customer and client accounts primarily through two forms of third-party disbursements: unauthorized ACH payments and unauthorized wire transfers,” the order states.

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