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Ameriprise Financial (AMP) Sues LPL Financial (LPLA) Unit
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Ameriprise Financial Services, Inc. (AMP - Free Report) has filed a lawsuit against LPL Financial Holdings Inc.’s (LPLA - Free Report) subsidiary, LPL Financial LLC (“LPL”) in the United States District Court. The lawsuit accuses LPLA of malpractice and mishandling of private and confidential client data and recruiting advisors while violating legal, regulatory and industry obligations.
The lawsuit, in particular, claims that LPLA deliberately directs the advisors it recruits from Ameriprise and other competitors to take confidential information with themselves on the way out of their former organizations. These actions are deemed to be in direct violation of several securities laws and regulations as well as the standards LPL is obliged to comply with as a member of the broker protocol for recruiting.
AMP further alleged that LPLA’s actions disregard all reasonable expectations of client privacy rights and expose its advisors to regulatory and criminal risks.
Ameriprise is imploring the court to prohibit LPLA from using any such data for client solicitation or other purposes. The company is also asking to prevent LPLA from destroying any illicitly collected information and instead return the data. Further, Ameriprise is seeking a court-appointed third-party forensic analyst to oversee the purging of the data from LPLA’s database once it has been returned.
Besides filing the case in court, Ameriprise has filed a request with the Financial Industry Regulatory Authority (FINRA), the broker-dealer industry's self-regulator, seeking arbitration in its dispute with LPLA. As this might take more than a year to arrive at a conclusion, AMP appealed in the court to put a temporary restraining order on LPLA to prevent it from using the client data for improper uses.
On the contrary, per an emailed statement to Reuters, LPLA noted that these actions by Ameriprise are an attempt to drive away competition in the financial services space and dissuade its advisors who are potentially considering leaving the firm.
Both LPLA and AMP have been engaged in recruiting advisors from one another. This July, LPLA hired a pair of advisors from Ameriprise who roughly managed around $475 million of assets.
In June, Ameriprise recruited back a team managing $105 million in assets and spent five years at LPLA.
Over the past year, LPLA shares have lost 3%, while AMP shares have gained 25.8%.
Currently, AMP has a Zacks Rank #4 (Sell), while LPLA carries a Zacks Rank #3 (Hold).
This July, Citigroup Inc. (C - Free Report) was penalized by U.S. bank regulators with a $136 million fine for failing to make adequate progress in fixing data management issues.
The regulators stated that Citi made “insufficient progress” in dealing with the issues identified in 2020, which required Citi to fix these issues in its enterprise-wide risk management, compliance risk management, data governance and internal controls.
Likewise, Mitsubishi UFJ Financial Group, Inc.’s (MUFG - Free Report) banking and securities units have been penalized by Japan’s financial regulator for breaching the regulations governing client confidentiality. MUFG Bank Ltd., Morgan Stanley MUFG Securities Co. and Mitsubishi UFJ Morgan Stanley Securities Co. units are directed by the Financial Services Agency (“FSA”) to reinforce its compliance measures, per Reuters.
This order came to light following an investigation that identified several breaches of "firewall" regulations.
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Ameriprise Financial (AMP) Sues LPL Financial (LPLA) Unit
Ameriprise Financial Services, Inc. (AMP - Free Report) has filed a lawsuit against LPL Financial Holdings Inc.’s (LPLA - Free Report) subsidiary, LPL Financial LLC (“LPL”) in the United States District Court. The lawsuit accuses LPLA of malpractice and mishandling of private and confidential client data and recruiting advisors while violating legal, regulatory and industry obligations.
The lawsuit, in particular, claims that LPLA deliberately directs the advisors it recruits from Ameriprise and other competitors to take confidential information with themselves on the way out of their former organizations. These actions are deemed to be in direct violation of several securities laws and regulations as well as the standards LPL is obliged to comply with as a member of the broker protocol for recruiting.
AMP further alleged that LPLA’s actions disregard all reasonable expectations of client privacy rights and expose its advisors to regulatory and criminal risks.
Ameriprise is imploring the court to prohibit LPLA from using any such data for client solicitation or other purposes. The company is also asking to prevent LPLA from destroying any illicitly collected information and instead return the data. Further, Ameriprise is seeking a court-appointed third-party forensic analyst to oversee the purging of the data from LPLA’s database once it has been returned.
Besides filing the case in court, Ameriprise has filed a request with the Financial Industry Regulatory Authority (FINRA), the broker-dealer industry's self-regulator, seeking arbitration in its dispute with LPLA. As this might take more than a year to arrive at a conclusion, AMP appealed in the court to put a temporary restraining order on LPLA to prevent it from using the client data for improper uses.
On the contrary, per an emailed statement to Reuters, LPLA noted that these actions by Ameriprise are an attempt to drive away competition in the financial services space and dissuade its advisors who are potentially considering leaving the firm.
Both LPLA and AMP have been engaged in recruiting advisors from one another. This July, LPLA hired a pair of advisors from Ameriprise who roughly managed around $475 million of assets.
In June, Ameriprise recruited back a team managing $105 million in assets and spent five years at LPLA.
Over the past year, LPLA shares have lost 3%, while AMP shares have gained 25.8%.
Currently, AMP has a Zacks Rank #4 (Sell), while LPLA carries a Zacks Rank #3 (Hold).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Legal Issues Faced by Other Finance Companies
This July, Citigroup Inc. (C - Free Report) was penalized by U.S. bank regulators with a $136 million fine for failing to make adequate progress in fixing data management issues.
The regulators stated that Citi made “insufficient progress” in dealing with the issues identified in 2020, which required Citi to fix these issues in its enterprise-wide risk management, compliance risk management, data governance and internal controls.
Likewise, Mitsubishi UFJ Financial Group, Inc.’s (MUFG - Free Report) banking and securities units have been penalized by Japan’s financial regulator for breaching the regulations governing client confidentiality. MUFG Bank Ltd., Morgan Stanley MUFG Securities Co. and Mitsubishi UFJ Morgan Stanley Securities Co. units are directed by the Financial Services Agency (“FSA”) to reinforce its compliance measures, per Reuters.
This order came to light following an investigation that identified several breaches of "firewall" regulations.