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Settlement Reached in Case of Former Morgan Stanley Adviser Who Defrauded Elderly

Settlement Reached in Case of Former Morgan Stanley Adviser Who Defrauded Elderly. Broker-dealer, brokerage, financial services, regulator, regulatory, SEC, securities and exchange commission, McKelvey, fraud

A settlement was reached in the civil action, Securities and Exchange Commission v. Douglas McKelvey. Former financial adviser McKelvey admitted to fraud, i.e., misappropriating more than $1.7 million from two elderly brokerage customers who, according to the SEC, were close relatives of McKelvey’s.

As previously reported in The DI Wire, SEC’s complaint alleged that from June 2013 to February 2022, while employed as a registered representative and investment adviser representative in the Southlake, Texas office of Morgan Stanley, McKelvey initiated over 300 fraudulent and unauthorized disbursements of funds from the two customers’ accounts to make payments on credit cards used by McKelvey and his wife to pay their personal expenses.

The SEC’s complaint, filed in the U.S. District Court for the Northern District of Texas, charged McKelvey with violations of the antifraud provisions. The SEC sought permanent injunctive relief, the disgorgement of allegedly ill-gotten gains plus prejudgment interest and a civil penalty. In a parallel action, the U.S. Attorney’s Office for the Eastern District of Texas announced criminal charges against McKelvey. McKelvey pled guilty to those charges in June 2023 and judgement was entered in November 2023.

McKelvey, age 58, also sold securities from the customers’ accounts to generate some of the funds he misappropriated and took steps attempting to conceal his misconduct.

According to SEC documentation, it was ordered pursuant to Section 15(b) of the Securities Exchange Act of 1934 and Section 203(f) of the Investment Advisers Act of 1940 that McKelvey be barred from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization. Also, pursuant to Section 15(b)(6) of the Exchange Act, McKelvey was barred from participating in any offering of a penny stock, including: acting as a promoter, finder, consultant, agent or other person who engages in activities with a broker, dealer or issuer for purposes of the issuance or trading in any penny stock, or inducing or attempting to induce the purchase or sale of any penny stock.

According to BrokerCheck, McKelvey served as an adviser for Morgan Stanley for 12 years until he was barred by FINRA in 2022 for refusing to provide information and documents. He previously worked for Citigroup Global Markets Inc., and UBS Financial Services Inc.

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