In a New York federal court, William Carleton, a former Seattle-based advisor with ties to Cetera, admitted to securities fraud, facing up to 20 years in prison for a multi-year scheme that involved unfairly prioritizing his own trades over those of his clients, according to the Justice Department.
U.S. Attorney Jamie McDonald stated that Carleton “admitted to systematically steering profitable trades to himself while leaving losing trades for his clients,” and “abusing that trust for personal gain.” Court documents show Carleton managed trading accounts with discretionary authority for up to 50 clients.
From January 2015 through about August 2022, Carleton would monitor price movements throughout the trading day. If a stock price jumped, he would typically sell the stock that same day and pocket the profits, but if the price went down during that same period, he’d assign the loss to a client’s account.
SEC records show Carleton registered with Vertical Asset Management in 1999 and had an 11-year tenure at First Allied Securities before joining Cetera in 2020. The agency launched an investigation in 2022, and Cetera fired Carleton in late 2023 due to “inappropriate trading practices.”
The agency noted that about 70% of trades in Carleton’s own accounts posted same-day gains, compared with only 16% of trades in his clients’ accounts, where 84% of them experienced losses. Carleton pocketed roughly $6 million in fraudulent profits through this scheme.
Carleton told the SEC he’d never made trades in his personal accounts to reassign them to clients’ accounts, claiming that he placed all client trades individually in each client’s accounts. In 2024, the SEC brought charges against him, claiming he’d made millions in “ill-gotten gains” based on his process of cherry-picking trades.
Carleton faces additional legal challenges beyond the federal charges. Numerous customer disputes have alleged “misrepresentation, negligence, breach of contract, and breach of fiduciary duty.” One such dispute was settled for $1.75 million.
While regulators and firms can dismantle specific schemes and impose penalties, the underlying pressure to deliver outsized returns may persist. The cycle of aggressive performance chasing can create environments where advisors feel compelled to take shortcuts, even if those shortcuts violate the fundamental duty of loyalty owed to clients.
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