Finra has suspended and fined an ex-Morgan Stanley advisor whom it said transferred thousands of dollars from a retirement account owned by his former spouse without her express authorization.
Michael J. Schmidt of Milwaukee, Wisconsin has agreed to a two-month suspension and a $5,000 fine from Finra after the regulator found he entered false information into the wirehouse’s system regarding fund transfers between accounts he managed.
Schmidt, whose career in the financial industry began in 1993 with Citigroup, was registered with Morgan Stanley from June 2009 until his termination in February 2024, according to his BrokerCheck record.
The AWC letter from Finra explained how Morgan Stanley discharged Schmidt after raising “concerns regarding activity with respect to a family member’s account, including liquidations and transfers entered by registered representative without receiving specific verbal authorization immediately beforehand so as to satisfy family expenses.”
Finra’s investigation centered on a series of transfers between June 2021 and June 2022. During that period, Schmidt completed 15 fund transfers from an advisory IRA account solely owned by his then-spouse to a joint brokerage account, which the two used as a cash maangement account for joint expenses.
While Schmidt had caused funds to be moved from his ex-spouse's IRA to their joint account on 11 previous occasions, the regulator said he got her express preauthorization for those transactions. Finra said that wasn't the case for the next 15 transfers, which totaled $13,543, even though entries in the firm’s journaling system suggested everything was status quo.
“All 26 transfers, including the 15 transfers for which he failed to obtain preauthorization, Schmidt caused the entry of information in the firm’s system stating that he had obtained Customer 1’s preauthorization on a particular date and at a particular time, and that she had provided a reason for the transfer,” the letter stated. “In all instances, the transferred funds were used to cover the couple’s joint expenses.”
Schmidt's BrokerCheck record also includes a dispute from December 2022, which alleged forgery and misappropriation of funds from an inherited IRA account between 2019 and 2022, among other things. That dispute was settled for $65,000 – the same amount in securities his ex-wife had used to fund her IRA upon opening it in July 2019.
Finra concluded that Schmidt’s actions violated Rule 2010, which requires individuals under its jurisdiction to “observe high standards of commercial honor and just and equitable principles of trade.”
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