Advisor Admits Steering Profitable Trades Away From Clients

Full analysis

William Carleton, a Seattle-based former investment advisor who worked at Cetera, pleaded guilty in federal court to securities fraud for a cherry-picking scheme that ran from January 2015 through about August 2022. He used discretionary authority — the legal power to buy and sell securities on behalf of clients without asking permission for each trade — to buy stocks in his own personal account, keep the gains when prices rose, and push the losing positions into client accounts. About 70% of trades in his own accounts posted same-day gains, compared with only 16% of trades in client accounts; he pocketed roughly $6 million in fraudulent profits. The scheme affected up to 50 clients, and one customer dispute was settled for $1.75 million. Carleton faces a maximum sentence of 20 years in prison. The case is a reminder that investors with discretionary accounts should periodically request trade confirmations showing the exact time and price of each transaction in their account versus the advisor's own accounts — a pattern of losses while the advisor profits is a warning sign.