Edward Jones has won a significant legal victory in its ongoing battle to protect client data, with a FINRA arbitration panel ordering Ameriprise Financial and a former Edward Jones advisor to pay more than $4.7 million in damages and legal fees. The award, issued Tuesday, stems from a lawsuit filed in 2023 alleging that the advisor, Cory Clem, misappropriated trade secrets when he left the firm to join Ameriprise.
The three-person arbitration panel, operating under FINRA Dispute Resolution Services, found that Clem and Ameriprise were jointly liable for $1.65 million in compensatory damages and legal fees. The total award, including additional costs, reached $4.7 million. The panel did not provide a detailed rationale for its decision, which is typical in FINRA arbitrations.
According to the arbitration award, Edward Jones alleged that between October 2022 and January 2023, while still employed at the firm, Clem worked with Ameriprise to misappropriate confidential client information, solicit clients, encourage other employees to leave, and set up a competing business in the same town as his Edward Jones branch in Macomb, Illinois. Clem had been with Edward Jones from 2010 until his departure in January 2023.
This case highlights the intense competition for client relationships in the financial advisory industry, where advisors moving between firms often trigger legal disputes over the ownership of client data. Broker-dealers and RIAs frequently turn to courts or arbitration to enforce non-solicitation agreements and protect trade secrets.
An Ameriprise spokesperson said in an email: “We disagree with the outcome of this matter. We remain focused on supporting advisor transitions in a manner consistent with industry standards and obligations while providing an exceptional client experience.” Edward Jones did not respond to a request for comment.
The award comes as both firms are actively competing for advisor talent and client assets. Ameriprise recently launched a $100 million television advertising campaign, even as its second-quarter client flows slipped to $3.1 billion. Meanwhile, Edward Jones has been expanding its digital offerings and courting younger investors with a hybrid advice platform.
Industry observers note that trade-secret litigation is a recurring theme in advisor transitions. The outcome of this case may prompt firms to review their own policies regarding client data and advisor departures. For advisors considering a move, the ruling underscores the potential financial and legal risks of taking client information to a new firm.
While the arbitration award is substantial, it is not unprecedented. In recent years, similar cases have resulted in multi-million-dollar judgments. The decision also serves as a reminder of the importance of robust compliance procedures and clear communication about what constitutes permissible client contact after a transition.
