The Massachusetts Secretary of State has charged a former Morgan Stanley Smith Barney advisor with taking money from her elderly clients and diverting it into a Cape Cod company she controlled.

Carlene B. Veara, the former MSSB registered representative, allegedly gained access and control over all the assets of one of her MSSB clients, a 98-year-old woman in failing health with no known relatives, according to the state administrative complaint. “Veara has power of attorney for this investor, and has successfully transferred $177,000” from the client’s account to Cape Cod Caretakers, Veara’s company, the complaint said. The advisor closed out two of the client’s accounts, took money from an annuity and became a 50% beneficiary of another account, the complaint alleged.

The 74-year-old Veara also became an executrix and beneficiary of the client’s will and a transfer-on-death beneficiary of her MSSB account, which is valued at more than $600,000. While a joint owner of the client’s bank account, payments from MSSB from the investor’s accounts went into an account that Veara owned, in violation of FINRA rules, the state complaint said. “While Veara was employed at MSSB, none of these arrangements were affirmatively disclosed to her employer” as required by the firm.

In a statement from MSSB, the firm said: “Morgan Stanley Smith Barney promptly terminated Ms. Veara in May, 2010 after determining she had violated firm policies.” The firm added that it “is fully cooperating with regulators.”

The violations were discovered when state examiners conducted a books and records exam of the Hyannis branch of MSSB. That’s when they discovered that Veara was allegedly running on outside business as the principal and sole executive officer of Cape Cod Caretakers Corp., and didn’t disclose her activities to the firm.

Registered reps are required under both FINRA rules and firm policies to disclose any outside business activities that might be potential conflicts of interest to their employers.

“In speaking to examiners, Veara claimed that her name on corporate documents [for Cape Cod Caretakers] was a formality as a result of her son’s recent bankruptcy and that she herself had no involvement in the management of the company. She further claimed that she did not think she had to disclose such an outside business to MSSB because of her limited, purely formal involvement.” She also claimed that her son really ran the day-to-day operations of Cape Cod Caretakers.

However, examiners discovered that wasn’t true, the complaint said. Investigators subpoenaed documents from the outside company’s bank accounts, which showed that Veara was the sole signatory on its checking account and that she had written more than 700 checks to pay for operational expenses. In addition, most of the company records were stored at her home and her son later testified against her saying that she had always been manager of Cape Cod Caretakers.

In addition to the 98-year-old client, the state alleged, “Veara entered into various forms of fiduciary relationships with multiple clients, such as trustee of a trust, an executrix of a will, or as a health care proxy – all without disclosing that relationship and associated conflicts of interest to her employer.”

She also used her position at MSSB to refer other prosperous elderly clients in ill health to Cape Cod Caretakers, investigators alleged. “Examiners have uncovered a total of $443,251.84 in assets belonging to other Veara clients at Morgan Stanley Smith Barney that have been transferred to Veara’s company,” the complaint said.

The state is seeking a cease-and-desist order against the former rep, revocation of her registration, a monetary fine and to compensate investors for their losses.


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