By Andrew Welsch

There is a new twist in the multifaceted legal war between wealth management companies LPL Financial and Ameriprise.

LPL this week sued its rival for allegedly sending misleading data breach notices to LPL customers who had moved their investments to the company after their financial advisors left Ameriprise to join LPL.

The notices could "leave thousands of customers with the false impression that their data has been stolen," LPL's lawsuit says. The company is asking a federal judge to order Ameriprise to cease and desist from sending further statements to LPL account holders. LPL is also requesting the judge to compel Ameriprise to provide LPL with a list of account holders to whom Ameriprise sent data notices.

The lawsuit, which was filed in a federal court in San Diego, is the latest development in a heated legal dispute between LPL and Ameriprise that centers on advisor recruiting practices. The companies are among the nation's largest wealth management companies, with more than 30,000 financial advisors between them. Many of those advisors are independent contractors who own their practices.

"Ameriprise has sunk to a new low by sending misleading data breach notices to investors whose advisors left Ameriprise for LPL," a representative for LPL said in a statement. "These notices misrepresent routine account transitions and falsely claim the advisors mishandled client personal information. This is a blatant and desperate attempt to instill fear and distrust in these investors and tarnish the reputation of their advisors."

In some instances, the data breach notices were sent to clients who had transferred years earlier, according to the LPL representative. "We assure 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," the representative said. "It is time for Ameriprise to stop engaging in tactics that harm both small-business owners and the clients they serve."

A representative for Ameriprise said the company is merely trying to protect clients. "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 representative said. "Let's be clear -- 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."

Bad blood. In July 2024, Ameriprise sued LPL for allegedly encouraging advisors to take confidential client and company information as they left Ameriprise to join LPL. Ameriprise's lawsuit claimed LPL recruits used a mass-upload tool to gather client information. LPL denied the allegations, saying advisors only took client information that they were permitted to. In December, they reached an agreement for identifying data that Ameriprise says LPL has in its possession but shouldn't possess.

Earlier this month, Ameriprise sent data breach notices to thousands of former Ameriprise clients who are now LPL customers, informing them that their advisors allegedly accessed their information without authorization and that customers should now monitor for unauthorized transactions in their accounts and identity theft, according to LPL's lawsuit.

"These statements are false and defamatory," the lawsuit states. "Account holders are plainly not at risk of identity theft from their own LPL financial advisors. Nonetheless, upon receipt of the notice, account holders are now calling their advisors, worried that their data has been hacked."

The lawsuit says that advisors affiliated with Ameriprise's independent broker-dealer are permitted to retain certain information required to continue servicing clients should the advisors choose to move to a different firm. Between 2018 and 2021, 30 Amerprise advisors joined LPL while retaining some client information. "That they did so was no secret to Ameriprise," the lawsuit states.

Minneapolis-based Ameriprise has sued some individual advisors who left to join LPL, accusing them of improperly taking client information. The advisors have denied this. LPL's lawsuit says Ameriprise has engaged in "serial and vexatious litigation" to chill further departures and is now "weaponizing" data breach notices to gain an advantage over LPL.

San Diego-based LPL included a copy of the purported notice, which states: "I am writing to inform you of an incident involving your personal information. Unfortunately, it has been determined that there has been unauthorized access to your information."

LPL's lawsuit says it doesn't know how many customers received Ameriprise's notice but that the action has created confusion among clients and frustration among advisors. David Ferrell, an advisor who moved to LPL from Ameriprise in 2019, said in a court filing that clients have reached out to him after receiving data breach notices.

"Ameriprise is reaching out to my clients and scaring them about an alleged 'data breach' that hasn't actually occurred, forcing me to devote time and attention to figuring out who received the letter and what it said -- all at a time when I need to be devoting my maximal attention to monitoring market movement and assisting my clients with their financial needs," he said.

Write to Andrew Welsch at andrew.welsch@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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April 17, 2025 16:29 ET (20:29 GMT)

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