It's a classic dispute over what client information brokers can take with them when they move among brokerages, but this time a registered investment adviser is the one picking a fight with a big firm.
Hanson McClain Inc., a registered investment adviser with about $1.6 billion in assets under management, has sued a former adviser, Thomas Chandler, and
Ameriprise Financial Services Inc. The Sacramento, Calif.-based RIA claims they took confidential client information and solicited Hanson McClain customers in violation of their contracts and California law.
“Defendant's egregious and despicable conduct is the 21st-century version of highway robbery,” Hanson McClain said in the complaint. “Defendants seek to profit by free-riding on [Hanson McClain's] valuable information that they stole.”
Hanson McClain initially filed a complaint Sept. 3, less than a week after Mr. Chandler left the firm. It filed an amended complaint Dec. 17. The firm seeks a permanent injunction blocking Mr. Chandler from soliciting clients, the return of client information and compensatory damages.
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Hanson McClain, founded in 1993 by Scott Hanson and Pat McClain, has about 35 advisers. It said Mr. Chandler downloaded client information from the firm's server, then transferred the data to a personal email account before departing Labor Day weekend. The information, which allegedly included names, account numbers, net worth, birthdays and phone numbers, involved clients with total net worth of about $540 million, according to the complaint.
Hanson McClain also accused Mr. Chandler of requesting a list of emails for “platinum” list clients, with whom he worked for about a month before he left, then connecting with them on LinkedIn so he could access information through the social media network once had exited.
The complaint said Ameriprise and a branch manager, Kable Doria, had “conspired” with Mr. Chandler to remove the data in order to compete unfairly with Hanson McClain.
Advisers frequently take some client contact information when they switch firms, under the Broker Protocol. It allows them to take client names, home and email addresses, phone numbers and account titles without threat of litigation or accusations they violated their firms' nonsolicitation agreements.
Hanson McClain is not a signee of the protocol, however, but Ameriprise is.
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Still, Mr. Chandler has opposed the request for the injunction. He says he had a right to notify clients of his new employment and that the information he took did not qualify as a “trade secret” under California law.
“Mr. Chandler used this basic client information for the permissible purpose of making this announcement when he began working at Ameriprise,” states a motion on his behalf opposing the injunction. "Mr. Chandler did not solicit the business of these clients or ask them to transfer their accounts.”
The lawsuit is without merit, according to Ameriprise spokesman Chris Reese.
“It's standard practice for advisers to notify clients when they move from one firm to another, and California law expressly permits employees to announce their new affiliation to former clients,” Mr. Reese said in an emailed statement.
The court did, however, grant a preliminary injunction in November that prevented Mr. Chandler and Ameriprise from using any confidential information from Hanson McClain to contact clients and obligated them to return certain documents while the lawsuit was pending.
If a client reached out to Mr. Chandler, though, it would not be a problem, according Eileen Diepenbrock, an attorney for Hanson McClain.
“The injunction went very, very far,” Ms. Diepenbrock said.
