Ameriprise Financial has taken legal action against LPL Financial, an industry competitor, accusing LPL of encouraging brokers it recruits away from Ameriprise to “harvest” and “misappropriate” confidential client information when the brokers transition between investment firms. The lawsuit, filed on July 30, 2024, in the U.S. District Court for the Southern District of California, seeks a temporary restraining order (TRO) to prevent LPL from retaining or using any client information it allegedly acquired improperly when the Ameriprise brokers left for LPL. Additionally, Ameriprise is pursuing an arbitration claim seeking damages and permanent injunctive relief against LPL.
The Allegations: Encouraging Misappropriation of Client Information
Ameriprise’s lawsuit accuses LPL of engaging in practices that violate federal securities laws and the Protocol for Broker Recruiting, an intra-industry agreement allowing departing brokers to take limited client data, such as names and contact information when moving between firms. Ameriprise alleges that LPL has been encouraging its recruits to take more sensitive client information beyond what is permitted by the Protocol.
According to the complaint, LPL provided its newly recruited brokers with a “bulk upload spreadsheet” designed to quickly populate Social Security numbers, account details, and other sensitive information. This tool allegedly enabled brokers to rapidly and unfairly transition business from Ameriprise to LPL, undermining the trust clients placed in their financial advisors and exposing them to potential risks associated with the misuse of their personal data.
Ameriprise’s representative did not mince words in a press release accompanying the lawsuit. “It is time for LPL to be held accountable for their reckless disregard for clients and advisors. They have demonstrated zero semblance of care when handling the personal information of thousands of unsuspecting investors who are unaware that LPL allowed and encouraged its recruits to engage in this misconduct.”
LPL’s Response: Defending Independence
LPL Financial responded to the lawsuit, dismissing Ameriprise’s claims as part of an “ongoing effort” to stifle competition and intimidate advisors who might consider leaving Ameriprise for LPL. In a statement, an LPL spokesperson emphasized the firm’s commitment to supporting the independence of its brokers and vowed to vigorously defend against what it described as frivolous accusations.
“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 spokesperson said.
Legal Experts Weigh In
While Ameriprise faces an uphill battle in convincing a judge to issue such a broad order against LPL, the firm’s lawsuit may be part of a broader strategy to draw regulatory attention to its claims. By filing this lawsuit, Ameriprise appears to be sending a message to FINRA that LPL’s business practices may be harmful to the securities industry and to the customers.
Escalating Tensions Between Ameriprise and LPL
The lawsuit filed this week is not the first time Ameriprise has clashed with LPL over similar issues. In June 2024, Ameriprise made similar allegations against LPL and a father-son brokerage team in Michigan. Ameriprise claimed that LPL encouraged the duo to mail packages of sensitive information, including Social Security numbers, to their clients and to email themselves account and routing numbers ahead of their departure from Ameriprise.
LPL countered these allegations in court filings, arguing that the case was a “cynical attempt” by Ameriprise to intimidate other brokers who might be considering a move to LPL. “Rather than investing its time and resources into improving its business model… Ameriprise would rather continue its pattern of suing advisors who leave,” LPL’s representative wrote. “Its filing this action can only be meant to amplify its underlying message: if you leave Ameriprise, Ameriprise will stop at nothing to punish you.”
Despite these heated exchanges, the Michigan brokerage duo agreed to a temporary restraining order (TRO) without admitting any wrongdoing, and a judge subsequently granted a TRO against LPL.
The Battle for Talent in the Financial Services Industry
The ongoing legal battles between Ameriprise and LPL underscore the intense competition between firms in the financial services industry, particularly as they vie for talented brokers and their valuable client relationships. LPL, with over 22,000 brokers, is the largest independent broker-dealer in the country, while Ameriprise, with around 10,000 brokers—including 8,100 independent contractors—remains a formidable competitor.
Amid these courtroom conflicts, both firms continue to aggressively recruit and trade teams of brokers, each seeking to expand their market share and client base. The legal skirmishes, however, highlight the potential pitfalls and ethical challenges that can arise when brokers transition between firms, particularly when sensitive client information is involved.
Protecting Your Rights and Information as the Financial Advisor
If you are a financial advisor caught up in the recruiting wars, you need to hire a highly skilled independent securities industry attorney to advise you during the transition process. While it is convenient and cost-efficient to accept the recruiting firm’s outside lawyer, the relationship lacks independence because that lawyer is hired to onboard you to the recruiting firm. It is not truly independent advice. Contact the attorneys at Reif Law Group, P.C. if you want truly independent highly skilled securities industry advice in the transition between investment firms.
Protecting Your Rights and Information as the Customer
If you are the customer caught up in the transition of the financial advisor between firms, you need to consider the potential risk that your confidential information was compromised in the financial advisor’s exit. You also need to consider the potential risk that the departing broker sold or liquidated positions in your portfolio to more easily port your accounts to the new firm. Sometimes these sales or liquidations have serious tax consequences for you. Contact the attorneys at Reif Law Group, P.C. for a free initial case consultation of your rights.
Our experienced legal team is dedicated to protecting your rights and ensuring that your personal information is handled with the utmost care and integrity. If you believe that your confidential financial information or your accounts have been mishandled during the financial advisor’s departure from the investment firm, you need to protect yourself by contacting Reif Law Group, P.C. for a free, confidential consultation.
We will work tirelessly to hold those responsible accountable and to ensure that your rights and financial interests are protected. Reach out to Reif Law Group today to discuss your case and take the first step toward safeguarding your personal and financial information.
