A former advisor for Ameriprise Financial will have to pay compensatory damages to the firm after being accused of taking confidential client information with him when he left, ThinkAdvisor reports.
A panel of Financial Industry Regulatory Authority arbitrators ordered Ohio-based Matthew C. Daugherty to pay $383,000. Daugherty left Ameriprise in November 2023 to found his own RIA, Balanced Wealth Group. According to Ameriprise, Daugherty terminated his affiliation with the company the same day he formed his new firm, and “devised a brazen scheme while still affiliated with (the company) to take with him and use highly sensitive information, including detailed account information and social security numbers, for his own personal benefit.”
Daugherty was accused of violating his contractual and regulatory obligations. Ameriprise alleged that he misappropriated client data in violation of state laws, improperly interfered with its business relationships and violated the Protocol for Broker Recruiting, an agreement between financial firms that allows brokers to take limited client information with them when they move to a new firm.
In its statement of claim, Ameriprise alleged pre-termination breach of contract, post-termination breach of contract, misappropriation under the Defend Trade Secrets Act, misappropriation under the Ohio Uniform Trade Secrets Act, and interference with business relationship. No details were disclosed regarding the alleged scheme.
Daugherty, who was registered through Ameriprise for 22 years, denied the allegations (unless specifically admitted in his response) and asked that FINRA dismiss the claims. While Daugherty is responsible for compensatory damages, the panel denied any claims for relief not specifically addressed in the award, including any requests for punitive damages, treble damages and attorneys’ fees. The arbitrators split the $14,950 in hearing session fees evenly between Daugherty and Ameriprise.
In an email to ThinkAdvisor, Daugherty’s lawyer, Lisanne Butterfield, said: “Mr. Daugherty denied, and Ameriprise Services LLC failed to prove, that he ‘devised a brazen scheme’ to take ‘highly sensitive’ client information when he voluntarily resigned from Ameriprise, pursuant to the Broker Protocol, and formed his new, independent RIA firm, Balanced Wealth Group, LLC.
A statement by Ameriprise said, “There is no planned appeal: The Arbitration Panel expressly denied Ameriprise Financial’s claims for punitive damages, costs, disbursements, reasonable attorneys’ fees, expert witness fees, and interest. The arbitration award otherwise speaks for itself. We’re pleased the arbitration panel held Mr. Daugherty accountable for his brazen violation of the Protocol for Broker Recruiting, among other legal and regulatory obligations. At Ameriprise, we support fair competition across the industry, provided firms and advisors adhere to legal and regulatory obligations, including those designed to protect our clients’ most sensitive, confidential information.”
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