LPL Financial drops suit accusing Ameprise of defamation

LPL Financial is dropping a defamation suit it filed nearly two months ago against Ameriprise over data breach notices sent to clients, although it could still pursue the dispute in FINRA arbitration.

LPL informed the federal court for the Southern District of California that it has decided to no longer pursue the defamation case, which it started in April. LPL had accused its rival firm of besmirching its name by sending out data breach notices to the clients of about 30 advisors it had recruited from Amerirprise.

LPL and Ameriprise agreed to have the defamation suit dismissed “with prejudice,” meaning that the same claims cannot be pursued again in federal court. But LPL left open the possibility of bringing its allegations before a Financial Industry Regulatory Authority arbitration panel, while Ameriprise said it could seek compensation for legal expenses in FINRA arbitration.

Ameriprise, LPL to swap information

As part of the case dismissal, both LPL and Ameriprise have taken on some new obligations. 

LPL now has a week to provide Ameriprise with a list of any non-LPL clients whose information it may have in its possession as a result of recruiting deals. After receiving that list, Ameriprise will have two weeks to furnish the names of the LPL clients to whom it sent data breach notices.

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LPL has also agreed to give Ameriprise 48 hours to review any communications it plans to send to clients about the data breach notices. Ameriprise has similarly agreed to give LPL the same 48-hour period to review any responses it may send out about LPL’s communications.

An Ameriprise spokesperson said the fact that the suit was dismissed with prejudice was “a recognition that LPL brought baseless charges and sought unwarranted relief.”

“In fact, this underscores that we took the lawful steps in clients’ best interests to inform impacted individuals of their data being shared without their authorization and contrary to our privacy policy, which protects them,” the spokesperson said.

An LPL spokesperson said LPL is happy with the outcome. 

“Ameriprise must provide a list of individuals who received what we see as misleading data breach notices, and protections are now in place to prevent this from happening in the future,” according to the spokesperson. “This agreement helps to safeguard the trust and transparency that are vital to our advisors and their clients.”

Lawsuits keeping flying

The two rival firms have been engaged in a series of legal skirmishes over the past year over LPL’s recruiting practices. In a separate lawsuit, they agreed in December last year to bring in a third-party consultant to preserve client information LPL had collected using what it calls a bulk upload tool. 

LPL used the tool from 2018 to the end of 2021 to transfer data for clients who were coming over with advisors it had recruited from Ameriprise. Ameriprise said the transferred information included confidential identifiers like Social Security Numbers and went beyond the limits set by the Broker Protocol — a voluntary pact restricting firms that agree to it to taking only clients’ names, addresses, phone numbers, email addresses and account titles from rivals.

In the now-dropped defamation suit, LPL accused Ameriprise of sending unwarranted alerts about data breaches to thousands of clients brought over from Ameriprise. The notices, according to LPL’s suit, said, “Your former Ameriprise Financial advisor left Ameriprise for LPL Financial during the period 2018-2020. In connection with that transition, your former advisor shared certain confidential personal information about you and your account(s) that exceeded the limited scope of information your former advisor was permitted to use for transition purposes.”

In a response filed in April, Ameriprise argued it was required to send the notices by laws in at least 47 states.

“While LPL may not perceive risk with the unauthorized and unsecure transfer of confidential, personal information, we’ll always stand up for clients and protect them,” the Ameriprise spokesperson said Friday.