Ameriprise Financial has initiated legal action against LPL Financial, alleging that the competing brokerage firm is engaging in recruiting practices that improperly encourage financial advisors to take confidential client and company information upon leaving Ameriprise.
According to the lawsuit, LPL advises recruits to take client social security numbers, account numbers, and other sensitive data to better target Ameriprise clients. In some instances, LPL recruits have allegedly uploaded this information to unsecured and unsupervised networks.
“LPL’s actions disregard all reasonable standards of client privacy and expose the advisors it recruits to regulatory and potentially criminal consequences,” Ameriprise asserts in the lawsuit, which was filed in a federal court in San Diego, where LPL Financial is headquartered.
Ameriprise seeks an injunction to prevent LPL from using any confidential information obtained from Ameriprise and to mandate the return of all such information, including documents and materials. Additionally, Ameriprise is pursuing a simultaneous arbitration case against LPL with Finra, the industry’s self-regulatory organization.
An LPL Financial spokesperson responded, stating: “Ameriprise’s actions are part of an ongoing effort to stifle competition in the financial services sector and intimidate advisors considering a move to another firm. LPL will vigorously defend against these claims and all similar frivolous cases from Ameriprise.”
Ameriprise’s spokesperson indicated the company has observed a “widespread pattern” of LPL encouraging advisors to misappropriate Ameriprise’s confidential client information and trade secrets. “The facts of this case against LPL are clear, compelling, and concerning,” she said.
This lawsuit highlights a significant dispute over recruiting practices between two of the largest brokerage firms in the country. Together, Ameriprise and LPL have over 30,000 financial advisors and approximately $3 trillion in assets.
LPL Financial has been growing through acquisitions and recruiting individual financial advisors and teams. The San Diego-based firm offers advisors various ways to affiliate, including through an independent broker-dealer and an employee brokerage unit.
Minneapolis-based Ameriprise also operates independent and employee brokerage units and has been actively recruiting financial advisors.
The Ameriprise lawsuit claims LPL’s recruiting tactics have at times breached industry standards and regulatory rules. The lawsuit points out that both Ameriprise and LPL are signatories to the Protocol for Broker Recruiting, which allows advisors to take basic client contact information when switching firms. However, the lawsuit alleges that LPL encourages recruits from Ameriprise to violate the protocol by retaining information “well beyond what is permissible.” Breaching the protocol voids its protections, the lawsuit states.
“LPL encourages and instructs Ameriprise recruits to harvest confidential client information from Ameriprise’s systems and turn it over to LPL shortly after joining LPL,” the lawsuit claims. “LPL has provided recruits with tools and instructions to do so, including a ‘bulk upload spreadsheet’ to fill with unauthorized information for LPL’s benefit.”
The lawsuit asserts that LPL previously claimed to have stopped this practice, but Ameriprise has discovered evidence of its continuation. Recruits are allegedly instructed to take client social security numbers, account numbers, routing numbers, dates of birth, and other confidential information.
“This far exceeds the limited types of information that LPL has agreed advisors can bring from another protocol firm,” the lawsuit states.
Ameriprise provides several examples of alleged improper recruiting tactics by LPL this year. For instance, in April, a team of advisors allegedly took boxes of confidential Ameriprise documents before joining LPL and used this information to solicit Ameriprise customers before resigning, to expedite their transition to LPL. (Ameriprise filed a separate lawsuit against that team of advisors and LPL in June, and a federal judge granted a restraining order against LPL on July 1.
Ameriprise argues that unless LPL is stopped from retaining and using its confidential information, its business will suffer irreparable harm.
