First Allied Advisory Services, Inc. and Cetera Investment Advisers LLC

Attorneys at ChapmanAlbin are investigating fraudulent trade allocation practices, or “cherry-picking,” carried out by investment advisers William Carlton and Hans Hernandez while they were associated with First Allied Advisory Services, Inc. and Cetera Investment Advisers LLC. These firms have been charged by the SEC for failing to prevent fraudulent practices that harmed clients, resulting in significant financial losses.

Between 2015 and 2022, Carlton and Hernandez used their positions to unfairly allocate profitable trades to their personal accounts at the expense of their clients. They executed trades in their personal accounts, observed price movements throughout the day, and then allocated the more profitable trades to themselves, while their clients received less profitable or losing trades.

The scheme affected many clients, with Carlton’s personal accounts gaining an average return of 0.50% on the first day of trades, while his clients’ accounts lost an average of 2.10%. Hernandez’s personal accounts similarly benefited, with his trades netting 0.50% returns, while his clients saw average losses of 0.40%.

Both First Allied and Cetera failed to implement or enforce policies designed to prevent such fraudulent activity. While the firms had procedures requiring trade allocations to be submitted and reviewed by the compliance department before execution, these rules were not followed. Carlton and Hernandez were allowed to engage in cherry-picking for years, making personal profits at their clients’ expense without oversight or consequence.

In their client-facing brochures, First Allied and Cetera claimed that their advisers were not allowed to disadvantage clients when trading their own accounts. However, this was false. Carlton and Hernandez regularly traded in the same securities for both personal and client accounts, often benefitting themselves at the expense of their clients.

As a result of these violations, First Allied and Cetera have been censured by the SEC. Both firms have been ordered to cease and desist from further violations, and each must pay a $200,000 civil penalty. The SEC may also choose to establish a Fair Fund to return funds to affected clients, pending further developments.

If you or someone you know has been affected by the fraudulent practices of First Allied Advisory Services, Cetera Investment Advisers, or their representatives, contact ChapmanAlbin today. We are committed to helping victims of investment fraud recover their losses. Our team offers free consultations to evaluate your case and discuss your legal options.