Ameriprise Financial and two of its employees must pay advisory firm Hanson McClain Advisors $1.5 million for using client information misappropriated by a former employee to solicit business, a trial court judge in California ruled earlier this month.
Sacramento-based Hanson McClain filed its initial complaint against its former adviser Thomas Chandler, Ameriprise, and Kable Doria, an Ameriprise branch manager, in September 2014, the month after Mr. Chandler suddenly departed Hanson McClain after 15 years with the firm.
Hanson McClain, which has $2.3 billion in assets under management, alleged Mr. Chandler took confidential information about at least 200 clients who had combined AUM of about $540 million. He then shared names, account numbers, account values, addresses, emails and other firm data about clients with Ameriprise, which he joined immediately after resigning, the complaint said.
Ameriprise, which manages about $499 billion in client assets, and Mr. Doria conspired with Mr. Chandler to gain the data and contact Hanson McClain clients whom Mr. Chandler had worked with, to try to convince them to move their business, violating both Mr. Chandler's contract and California law, according to the complaint.
The June 5 court ruling found that Mr. Chandler had breached his employment contract with Hanson McClain and that all three defendants had violated fair business practices and misappropriated trade secrets.
"We spent over $2 million to get a judge to say we're right," said Scott Hanson, co-founder of Hanson McClain. "Big companies shouldn't get to operate under different rules."
Ameriprise contends it followed all rules and laws.
"We believe we complied fully with industry standards and the law," Ameriprise spokeswoman Kathleen McClung said in an email.
Financial advisers who leave their firm must abide by their employment contract unless both the firm that the adviser leaves and goes to are part of the Protocol for Broker Recruiting, which sets a process for some client information to be brought to the new firm without threat of litigation. Ameriprise is a signee of the protocol, but Hanson McClain is not.
Mr. Hanson said his firm reached out to the Financial Industry Regulatory Authority Inc. and the CFP Board of Standards to present its case against Ameriprise and Mr. Chandler, who holds the certified financial planner designation. Neither seemed to pursue the matter, he said.
"Had the regulators or the CFP Board done even part of their job, it would have spared us this," Mr. Hanson said.
"In view of CFP Board's long-standing policy of publicly commenting only on CFP Board disciplinary matters that have resulted in public discipline, CFP Board has no comment on this matter," CFP Board spokesman Dan Drummond said in an email.
Finra did not responded to a request for comment on this case.
In its ruling, the Sacramento Superior Court also made permanent a temporary injunction it had issued against the three parties during the proceedings, barring their use of the data Mr. Chandler took from Hanson McClain.