Thousands of LPL customers whose advisors joined from Ameriprise between 2018 and 2020 have received notices from Ameriprise stating that their personal information was impermissibly used by the advisor, LPL says.
LPL Financial is accusing rival Ameriprise of defamation in the latest battle in the firms’ legal war over advisor recruiting.
Ameriprise last week sent a “Notice of Data Breach” to thousands of current LPL customers whose financial advisor switched to LPL from Ameriprise between 2018 and 2020, according to a complaint filed Monday in the U.S. District Court for the Southern District of California.
The notice “asserts that these account holders are now, years later, at risk of, and should monitor for, unauthorized transactions in their account and identity theft,” LPL said in the complaint.
“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,” the notices state, according to a notice template provided to LPL by Ameriprise and disclosed alongside the complaint.
LPL claims that the information retained by LPL advisors who left Ameriprise was “expressly permitted under the Ameriprise Franchise Agreement and done with Ameriprise’s knowledge and consent.”
“Account holders are plainly not at risk of identity theft from their own LPL financial advisors,” LPL states in the complaint. “Ameriprise lied to thousands of customers in a brazen attempt to defame a market competitor,” the complaint asserts.
LPL further claims that customers who have received the notices have been calling their advisors, “worried that their data has been hacked.”
LPL contends that the notices are defamatory and tortiously interfere with economic relationships. The firm is seeking an order compelling Ameriprise to provide a list of all the LPL customers who received the notice — a request that Ameriprise has so far resisted, according to the complaint.
The timing of Ameriprise’s delivery of the data-breach notices coincides with recent developments in a suit Ameriprise filed last July against LPL. In that suit, Ameriprise alleged that LPL, in recruiting Ameriprise advisors over a roughly four-year period beginning in 2018, “engaged in a widespread pattern and practice of harvesting and misappropriating Ameriprise’s private, confidential client information and trade secrets.”
Per the terms of a stipulated court order in that case, LPL in January of this year disclosed to Ameriprise confidential information found to have been transferred to LPL by advisors who joined from Ameriprise, according to the complaint in the instant case.
“The steps we took to inform impacted individuals their data had been compromised were completely lawful and contemplated by a federal court order to which LPL agreed,” an Ameriprise spokesperson told FA-IQ via email.
“Once again, LPL is trying to shift the narrative away from its misconduct instead of focusing on what matters most — protecting clients and their sensitive data,” the spokesperson added.
An LPL spokesperson told FA-IQ that the firm “assure[s] clients that their information was handled with the highest level of care and security, and that neither LPL nor its affiliated advisors have mishandled their data.”
“Ameriprise has sunk to a new low by sending misleading data breach notices to investors whose advisors left Ameriprise for LPL,” the LPL spokesperson said via email. “This is a blatant and desperate attempt to instill fear and distrust in these investors and tarnish the reputation of their advisors.”
Attorney David Harrison, whose firm is not involved in the case, told FA-IQ that LPL’s claim largely rests on whether the former Ameriprise advisors took more information than allowed by their Ameriprise agreement or the Protocol for Broker Recruiting, which specifies the information that advisors can retain when switching firms. Ameriprise and LPL are both protocol members.
“I think in the industry, a breach is when an unauthorized person takes information from the firm that they have no right to have, as opposed to saying the broker is authorized to have this information,” said Harrison, whose Beverly Hills, California–based firm, Bakhtiari & Harrison, represents individuals and institutions in securities-industry litigation.
For independent broker-dealers, “the customer de facto authorizes the leaving broker to keep that information,” Harrison said. In its complaint, LPL insists that it was not provided any information beyond what was permitted by the broker protocol or the advisors’ Ameriprise agreements.
But even if LPL can establish that a breach did not occur, Harrison says it’s not a certainty that a judge would agree to have Ameriprise disclose the identities of the LPL customers who received the breach notices.
“I believe that’s a reach. Because now, what you’re doing is you’re invading customers’ privacy,” Harrison said.
This week’s lawsuit is the latest in a series of legal spats between LPL and Ameriprise. The suit Ameriprise filed last July has been closed, but the underlying matter is still being contested in a companion claim in the Financial Industry Regulatory Authority’s dispute-resolution forum. And Ameriprise in the past year has filed at least three bids for restraining orders against advisors who moved to LPL, court filings show.
Since January 2024, Ameriprise has recruited from LPL at least 16 advisors overseeing a combined total of at least $3.25 billion in assets while LPL has recruited from Ameriprise at least 30 advisors overseeing a combined total of at least $3.89 billion, according to an FA-IQ tally of announced moves.