A former advisor for Cetera accused of defrauding his investment advisory clients has pleaded guilty, according to a report by WealthManagement.
Prosecutors said William Carleton engaged in a multi-year scheme of ‘cherry-picking’ in which he systematically allocated profitable trades to himself and unprofitable trades to his clients, thus gaining millions of dollars at the clients’ expense.
Carleton pleaded guilty in federal court in New York to securities fraud and faces a maximum sentence of 20 years in prison.
“Investment advisers are required to act with integrity and put their clients’ interests ahead of their own,” said U.S. Attorney Jamie McDonald. “William Carlton instead admitted to systematically steering profitable trades to himself while leaving losing trades for his clients. Today’s guilty plea holds him accountable for abusing that trust for personal gain.”
Carleton served as an investment adviser to over 50 clients each year. The cherry-picking allegations cover the period from at least January 2015 through August 2022.
The U.S. Attorney said that Carleton would purchase securities in his personal trading account and observe price movements during the trading day. When the price of a stock increased during the day, Carleton would sell the stock the same day and keep the profits for himself. But when the price went down, he assigned the stock to his clients’ accounts.
Investigators learned that about 70% of the trades Carleton assigned to his own accounts experienced same-day gains while only approximately 16% of the trades he assigned to his clients’ accounts experienced same-day gains.
Conversely, only approximately 30% of the trades assigned to Carleton’s own accounts experienced same-day losses. At the same time, approximately 84% of the trades he assigned to his clients’ accounts experienced same-day losses.
The scheme resulted in about $6 million in ill-gotten gains for Carleton while imposing losses on many of his clients, authorities said.
When confronted by the SEC about his conduct, the U.S. Attorney said Carleton falsely denied that he had ever made trades in his personal account and later reassigned them to his clients’ accounts, claiming falsely that he placed all client trades individually and directly in each client’s account.
The SEC began investigating Carleton in 2022, and he was fired by Cetera the following year due to “inappropriate trading practices.”
A Cetera spokesperson said that “upon learning about this issue, Cetera acted promptly to cease the activity and previously terminated this individual’s affiliation with Cetera. We have enhanced our processes to prevent any similar actions in the future. Cetera has fully cooperated with the SEC and the United States Attorney’s Office and will continue to do so as they pursue actions against this individual.”
In 2024, the SEC brought charges against Carlton, claiming he’d made millions in “ill-gotten gains” based on his process of cherry-picking trades.
Hyman Cotter routinely represents investors harmed when financial professionals and their firms engaged in misconduct that caused their clients investment losses. Our team includes lawyers who have worked for large financial institutions, including Morgan Stanley and UBS Financial Services, and regulatory bodies such as the SEC. If you think your financial professional or firm engaged in misconduct that caused you investment losses, contact Hyman Cotter at (833) 665-0784 or through our online contact form for a no-cost evaluation of your matter.
