By Andrew Welsch
LPL Financial and Ameriprise Financial have reached an agreement on customer data in their continuing legal battle over recruiting tactics that Ameriprise has said went over the line.
The agreement establishes a framework for identifying data that Ameriprise says LPL has in its possession but shouldn't possess, according to a stipulated order signed by a federal judge on Dec. 12. Because the companies reached an agreement, the judge denied as moot Ameriprise's prior request for an injunction against LPL.
It is the latest twist in a heated legal dispute that began in July when Ameriprise sued LPL in federal court, accusing its rival of improperly encouraging financial advisors to take confidential client and company information when they left Ameriprise to join LPL.
LPL has denied the allegations and accused its rival of "a public relations stunt masquerading as a lawsuit."
The case has been an unusual public spat over recruiting tactics between two of the largest wealth management companies in the nation. Between them, Ameriprise and LPL have approximately 30,000 financial advisors and about $3 trillion in assets. Ameriprise also filed a case against LPL in private arbitration forums run by industry self-regulatory organization Finra. That case continues, according to court documents.
An Ameriprise representative said the company was pleased with the judge's order and that the agreement entered in federal court represents a "victory" for clients and the industry. "We will continue to pursue our case on its merits in the ongoing Finra arbitration given the strength of the facts," the representative said in a statement.
A representative for LPL said in a statement that the company is pleased to move forward to arbitration. LPL's "focus is on supporting the advisors who understand the value of independence and providing high quality wealth management services to the clients they serve," the representative said.
Agreement. Per the judge's stipulated order, LPL agreed to review its systems to determine whether it possesses any data belonging to investors who didn't become LPL clients when their advisors moved to LPL from Ameriprise and, if it does, to delete it. In addition, the companies agreed to share in the costs of hiring a third-party forensic examination company, according to the order filed in a federal court in San Diego. LPL also agreed to identify any clients whose information was transferred to LPL via a bulk upload tool that enabled advisors to upload data en masse to LPL's systems. LPL will provide that information to the forensic examiner.
If an advisor is found to have kept client data upon his or her departure from Ameriprise, the forensic examiner may review the advisor's personal device (with the involvement of the advisor's attorney); create and provide copies of the data for LPL and Ameriprise; and permanently delete client data from an advisor's personal devices.
In its original legal complaint, Ameriprise asked the judge for an injunction to prevent LPL's "ongoing misappropriation" while it pursued a simultaneous arbitration case. Ameriprise said "LPL's conduct abandons all reasonable notions of client privacy rights and subjects the advisors it recruits to regulatory, and in some cases even criminal, exposure."
Ameriprise said LPL and some 30 former Ameriprise advisors were allegedly in the possession of information for more than 4,500 Ameriprise customers whose accounts had $1 billion in assets and produced over $16 million in annual revenue, according to an October filing.
LPL said in court filings that it hadn't used the bulk upload tool in years. The company asked the judge to reject Ameriprise's request, which it said would have stifled advisors' freedom of movement and clients' ability to work with their trusted advisors.
Write to Andrew Welsch at andrew.welsch@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
December 18, 2024 14:46 ET (19:46 GMT)
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