UNITED STATES SECURITIES AND EXCHANGE COMMISSION

The Securities and Exchange Commission ("Commission") deems it appropriate and in the public interest that public administrative proceedings be, and hereby are, instituted against Douglas McKelvey ("Respondent"). In anticipation of the institution of these proceedings, Respondent has submitted an Offer of Settlement (the "Offer") which the Commission has determined to accept. The Commission finds that on November 20, 2023, a judgment was entered by consent against McKelvey, permanently enjoining him from future violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, in the civil action entitled Securities and Exchange Commission v. Douglas McKelvey, No. 4:23-CV-564, in the United States District Court for the Northern District of Texas. The Commission's complaint alleged that, from approximately June 2013 through February 2022, McKelvey engaged in a fraudulent scheme through which he misappropriated more than $1.7 million from accounts of two elderly relatives who were brokerage customers while he served as their financial advisor at Financial Institution A. The complaint further alleged that McKelvey sold securities from the customers' accounts to generate some of the funds he misappropriated and took steps attempting to conceal his misconduct. On June 6, 2023, McKelvey pled guilty to one count of money laundering before a United States Magistrate Judge in the United States District Court for the Eastern District of Texas, in United States v. McKelvey, Crim. No. 4:23-CR-75. The Court accepted McKelvey's plea on July 8, 2023. In connection with that plea, Respondent admitted, inter alia, that beginning in approximately 2009, McKelvey began misappropriating investor funds held in brokerage accounts at Financial Institution A. Such funds were entrusted to Financial Institution A for the purpose of legitimate business investments but were instead redirected by McKelvey for personal, nonbusiness use. In total, McKelvey misappropriated at least $1.5 million in investor funds held at Financial Institution A.

Order

Bar (Permanent)

Association with a broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or NRSRO

Indefinite

1/22/2023

Penny Stock Bar

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

The Securities and Exchange Commission (the "Commission"), for its Complaint against McKelvey, alleges that he engaged in a fraudulent scheme through which he misappropriated more than $1.7 million from accounts of two elderly relatives ("Customer A" and "Customer B," and collectively the "Customers") while he served as their financial advisor at a large financial institution registered with the Commission as a broker-dealer and investment adviser. McKelvey carried out his scheme by initiating fraudulent disbursements of funds from the Customers' accounts at the financial institution to make credit card payments on credit cards used by McKelvey and/or his wife to pay their personal expenses. Initially, McKelvey primarily caused unauthorized checks to be issued from Customer A's accounts at the financial institution to make the Credit Card Payments. The following year, McKelvey made the Credit Card Payments by initiating unauthorized ACH transactions through the credit card companies that withdrew the funds from the Customers' accounts at the financial institution. In addition, in some instances, McKelvey first initiated fraudulent internal journals at the financial institution from the Customers' accounts to a trust account that he owned and controlled, which he then typically used to make Credit Card Payments via ACH transactions. In a number of instances, McKelvey sold securities in the Customers' accounts shortly before making the fraudulent transfers to make the Credit Card Payments so that cash was available for him to misappropriate. In certain other instances, he misappropriated by causing checks to be issued from Customer A's loan account that was collateralized by Customer A's brokerage account. By reason of the foregoing, McKelvey, directly or indirectly, singly or in concert, has violated and, unless enjoined, will again violate Exchange Act Section 10(b) and Rule 10b-5 thereunder.

Pending Final Judgement with disgorgement amount

Claimant alleges, inter alia, that the FA misappropriated funds from client's accounts 2008 - 2022

$450,000.00

FINRA

Without admitting or denying the findings, McKelvey consented to the sanction and to the entry of findings that he refused to provide information and documents requested by FINRA. The findings stated that this matter originated from a Uniform Termination Notice for Securities Industry Registration (Form U5) filed by McKelvey's member firm stating that he had been discharged because of concerns regarding his unauthorized activity and misappropriation of client funds from client accounts, which were held by his relatives.

Acceptance, Waiver & Consent(AWC)

Bar (Permanent)

All Capacities

Indefinite

8/26/2022

Claimant alleges, inter alia, FA misappropriated funds from Claimants' accounts - 2016 to 2022.

$1,400,000.00

MORGAN STANLEY

Discharged

Allegations regarding representative's unauthorized activity and misappropriation of funds from client accounts, which were held by relatives of the representative.

THE COMPLAINT AROSE OUT OF THE SALE OF AN AUCTION RATE SECURITY (ARS) THAT WAS MADE PRIOR TO THE WIDESPREAD ILLIQUIDITY IN THE ARS MARKET THAT OCCURRED IN FEBRUARY 2008.

$175,000.00