An industry arbitration panel has ordered a financial advisor in Ohio to pay $383,000 in compensatory damages to Ameriprise Financial, which accused him of scheming to take sensitive client information before leaving to form his own firm in 2023.
Ameriprise alleged that Matthew C. Daugherty “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,” according to the Financial Industry Regulatory Authority panel's award order, published Tuesday.
Ameriprise also alleged Daugherty terminated his affiliation with the financial services firm to join a new registered independent advisory the same day and undertook the scheme “even though this meant flouting his contractual obligations, his regulatory compliance obligations, and the Protocol for Broker Recruiting.”
The company claimed 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.
Daugherty, senior financial advisor and partner with Balanced Wealth Management in Ohio since November 2023, denied the allegations (unless specifically admitted in his response) and asked that FINRA dismiss the claims, the order states. He was registered through Ameriprise for over 22 years, according to the authority's BrokerCheck database.
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 panel also assessed the parties for certain fees related to the arbitration.
Daugherty's lawyer, Lisanne Butterfield, told ThinkAdvisor by email Thursday: "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.
"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."
Ameriprise said in a statement: "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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