Federal judge dismisses LPL’s defamation suit against Ameriprise

The courtroom slugfest between two financial advice giants, LPL Financial Holdings and Ameriprise Financial, took yet another turn last week when a federal judge in San Diego dismissed a lawsuit that LPL filed last month, alleging defamation.

The court order came after LPL agreed to drop its lawsuit that sought a temporary restraining order against its competitor last Thursday, according to a court filing.

But that doesn’t mean the contentiousness between the two is over.

Both firms agreed in the future to pursue the matter further under the aegis of the Financial Industry Regulatory Authority Inc., the private securities industry self-regulator that also oversees industry lawsuits in its arbitration forum. They also agreed to share customer information pertinent to the order.

For example, Ameriprise in the order agreed to give LPL the names of the customers that were sent the notice within three weeks.

LPL in April alleged that Ameriprise had informed former customers, now with LPL, that their accounts were in danger of being hacked by financial advisors who left Ameriprise years ago. 

Such data breach notices are among the most sensitive communications firms can have with clients, as customers are deathly afraid of losing control of their accounts to outside computer hackers.

Ameriprise has targeted LPL in at least four complaints sinch January 2024, alleging its competitor had unfairly hired its financial advisors. It’s a string of cases of two industry giants fighting for financial advisors at a time when the entire wealth management industry is in flux.

LPL works with 31,000 financial advisors and Ameriprise, 11,000. The latter's financial advisors, however, historically have produced more annual revenue than those at LPL and make attractive recruits for rivals.

“We’re pleased this case was dismissed with prejudice – a recognition that LPL brought baseless charges and sought unwarranted relief,” an Ameriprise spokesperson wrote in an email. “This ruling clearly shows LPL went to great lengths to shift the narrative away from its misconduct but ultimately did not prevail.”

“LPL used its recruits to engage in an unlawful practice, triggering our duty to inform clients under the data breach laws of 47 states,” according to the Ameriprise spokesperson.

“We are pleased with the outcome,” an LPL spokesperson wrote in an email. “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.”

In its original court filing from April, LPL sought a temporary restraining order and called Ameriprise’s notices to clients “false and defamatory.”

On April 8, Ameriprise “sent a purported ‘Notice of Data Breach’ to thousands of (as-yet unidentified) LPL account holders informing them that, years ago, their advisors accessed their information without authorization in connection with their transition from Ameriprise to LPL,” according to the filing.

According to LPL’s filing, Ameriprise’s notice to its former clients stated: “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.”