Ameriprise is upping the ante in its recruiting disputes with LPL Financial with a lawsuit filed in federal court on Tuesday.
The suit, filed in U.S. district court in Minneapolis, accuses LPL of a "widespread pattern and practice of harvesting and misappropriating Ameriprise's private, confidential client information and trade secrets … in connection with its unfair competition within the financial industry." Ameriprise specifically accuses LPL of encouraging recruited advisors to transfer "contact information, social security numbers, account numbers, account information, routing numbers, client dates of birth, client ID numbers, account values, securities values," among other things. Many times, the data is uploaded into spreadsheets that LPL provides to advisors when they join, according to the suit.
Ameriprise is asking the federal district court to enjoin LPL from using any data of that sort for the solicitation of clients or other purposes. It also asks that LPL be barred from destroying any illicitly obtained information and instead be required to give it back. Ameriprise further asks the court to require a third-party forensic analyst to be put in charge of purging the data from LPL's files after it has been returned.
Ameriprise's lawyers said in their filing that the firm has also filed a request with the Financial Industry Regulatory Authority, the broker-dealer industry's self-regulator, seeking arbitration in its dispute with LPL. But arbitration, which is mandatory among FINRA member firms, often takes more than a year to come to a conclusion.
Hence the need for a court injunction, Ameriprise contends. Without a temporary restraining order, LPL will continue to put client information to improper uses, according to the suit.
READ MORE:
"For years, LPL has flagrantly disregarded industry protocols in how it recruits financial advisors — and they have obtained and mishandled trade secrets and sensitive client data to which they are not entitled," said Michael Taaffe, a partner at Shumaker, Loop & Kendrick and for Ameriprise.
An LPL spokesperson said, "Ameriprise's actions are part of an ongoing effort to hinder competition in the financial-services space and intimidate its advisors who might consider leaving to join another firm. As a steward of independence in our industry, LPL will vigorously defend itself against these claims and all of Ameriprise's equally frivolous cases."
The suit specifically accuses LPL of violating the Broker Protocol, an industry-spanning pact setting limits on what types of information advisors can take with them when they move from one firm to another. The protocol extends its protections to client names, addresses, phone numbers, e-mail addresses and account titles; taking anything beyond that could mean trouble.
Ameriprise also accuses LPL of misappropriation of trade secrets, tortious interference, unfair competition and unjust enrichment.
"LPL's conduct is unacceptable and abandons all reasonable notions of client privacy rights. It also subjects the advisors it recruits to regulatory, and in some cases, even criminal exposure by encouraging this type of behavior," Ameriprise said in a statement.
Ameriprise and LPL are no strangers to courtroom disputes with each other.
That suit, which has resulted in a temporary restraining order against LPL, also involves allegations of breaches of the broker protocol. It prompted a sternly worded response in which LPL alleged Ameriprise was turning to the courts merely to intimidate other advisors who might be thinking of leaving to think again.
"Rather than investing its time and resources into improving its business model such that accomplished advisors like the McCanns don't feel the need to take their business elsewhere, Ameriprise would rather continue its pattern of suing advisors who leave without any reasonable basis to think these advisors have done anything wrong," according to the suit.
Ameriprise's latest suit cites the McCann case and several other recruiting deals that it says shine a light on LPL's allegedly underhanded practices. Ameriprise says it has reason to believe LPL retains information for clients who never ended up moving firms with a recruited advisor.
It also accuses LPL of being misleading about its track record in helping recruited advisors move assets under management over from their former firm. The suit says LPL "falsely misrepresents" that it's able to transfer 90% of those assets on average.
"Essentially, LPL uses incorrect and inflated statistical information to entreat advisors to misappropriate confidential client information on behalf of LPL in furtherance of moving the business they service to LPL, for LPL's benefit," according to the suit.
