A federal judge ordered that nearly 30 financial advisors who moved from Ameriprise to LPL and potentially transmitted confidential client information must submit to a review of whether it was illegally taken.
It is the latest development in the legal fracas between the two firms. Ameriprise argued in a lawsuit filed last July that several advisors illegally retained confidential client information when they resigned and moved to LPL.
In today’s order, Judge Jinsook Ohta ruled that the LPL advisors must agree to a review of their client information retention. LPL and Ameriprise agreed to hire a forensic examiner to investigate the claims. Ameriprise had previously filed a motion asking the court to demand LPL’s compliance (the judge’s decision today makes that order moot).
In Ameriprise’s suit, the firm claimed LPL directed recruits to procure confidential information, and subjected those recruits to “regulatory, and in some cases, even criminal exposure by encouraging this type of behavior,” according to an Ameriprise spokesperson. In response, LPL accused the firm of “remarkable hypocrisy” when touting its support of “independent advisors” while neglecting their rights.
According to today’s order, the third-party forensic examiner shall search data on the LPL advisors’ personal and business devices related to Ameriprise customers who did not end up transferring their business to LPL. If the examiners find confidential data, they will delete it from the devices while providing copies to attorneys for Ameriprise, LPL and the impacted advisors.
For customers who transferred their business, the examiner will copy and delete any data after the advisor’s license transfer date from Ameriprise to LPL. The order pertains to 29 advisors who left Ameriprise for LPL between 2018 and 2021, and allegedly collated client data on an Excel spreadsheet that Ameriprise argued was shared without data privacy safeguards.
The advisors in question must “complete the questionnaire regarding forensic review” by Aug. 1 and coordinate with the forensic examiner to delete any pertinent data by Aug. 15.
“Any individual financial advisors who fail to comply with the obligations and timeline set forth above will be subject to further court orders and sanctions and will further be deemed to have waived their right to object to any overbroad capture of data with metadata indicating it was obtained before their license transfer date,” the order read.
In a statement, an Ameriprise spokesperson said the judge’s decision is a “clear victory” for clients and the industry, reinforcing the firm’s efforts to protect client data.
“It puts LPL on notice that they must adhere to industry rules and standards,” the spokesperson said.
The judge also struck down an attempt by several former Ameriprise advisors who’d joined LPL to halt the search of their devices. In an effort to pause the search filed in May, 10 anonymous advisors argued they weren’t party to the agreement struck between LPL and Ameriprise that their devices could be searched.
The advisors argued they were “caught between two corporate behemoths engaged in a massive and multi-front recruiting battle,” and LPL supported their attempt to slow the search. Ameriprise claimed the advisors were coordinating with LPL “to either delay or disrupt” the original agreement.
Representatives for LPL did not respond to a request for comment.
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