Ameriprise Financial, a leading financial services firm, has accused its California-based competitor, LPL Financial, of actively recruiting its financial advisers and instructing them to illegally take Ameriprise client information. The Minneapolis-based company is seeking monetary relief through arbitration and has simultaneously filed a federal complaint against LPL, seeking a permanent injunction.
Uncovering LPL's Alleged Misconduct
Recruiting Tactics and Client Data Misappropriation
According to court filings, Ameriprise alleges that LPL has encouraged and instructed its recruits to "harvest confidential client information from Ameriprise's systems" and turn over that data shortly after joining LPL. Ameriprise claims that its competitor has provided recruits with tools and instructions to facilitate this process, including a "bulk upload spreadsheet" that allows them to transfer information they are not otherwise permitted to retain.
Patterns of Misconduct and Rapid Growth
Ameriprise states that LPL has added nearly 800 registered representatives so far this year, with a significant percentage coming from Ameriprise. The company argues that a large portion of these representatives who have left Ameriprise to join LPL have engaged in similar misconduct, and Ameriprise has uncovered a "pattern of continued misappropriation" by LPL and the majority of these recruits.
Defending Independence and Vigorously Denying Claims
In response, LPL has stated that 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 the industry, LPL has vowed to vigorously defend itself against Ameriprise's claims, which it describes as "equally frivolous cases."
Regulatory Violations and Breach of Protocols
Ameriprise argues that the use of customer information by departing representatives without the customer's express prior consent is a violation of U.S. Securities and Exchange Commission regulations. The company also states that certain protocols allow representatives transferring from one firm to another to take only a limited list of clients and contact information, but Ameriprise alleges that LPL has encouraged its recruits to take substantial client documents and confidential information "well beyond that permitted under the protocol."
Seeking Accountability and Punitive Damages
Ameriprise claims that it has sustained "irreparable injury" due to LPL's alleged misconduct and is asking the arbitration panel to force LPL to give up profits, bonuses, and other forms of compensation related to the alleged wrongdoing. The company is also seeking punitive damages, pre-judgment and post-judgment interest, and attorneys' fees.
Calling for Accountability and Responsible Handling of Client Data
Ameriprise's outside counsel, Michael Taaffe, has stated that the "pattern of behavior conducted by LPL is both shocking and concerning" and that LPL has "flagrantly disregarded industry protocols" in its recruitment practices. Taaffe argues that it is "time for LPL to be held accountable for their reckless disregard for clients and advisors" and their "demonstrated zero semblance of care when handling the personal information of thousands of unsuspecting investors."The ongoing dispute between Ameriprise and LPL highlights the importance of ethical recruitment practices and the responsible handling of client data in the financial services industry. As the case moves forward, the outcome will likely have significant implications for the industry and the protection of client information.
