Advisor Accuses LPL of 'Raiding' His Firm in Retaliation

A gavel on a judge's bench in a courtroom

A Kentucky wealth manager has accused LPL Financial of running a "classic corporate raid" against his firm, which had been an LPL affiliate for years, to retaliate when he sought to find a new broker-dealer and the relationship soured.

In a case recently moved from state to federal court in Kentucky, Lamkin Wealth Management and Louisville Wealth Management (referred to together as LWM) seek redress for what they call LPL's "improper, illegal and unjustified actions" against the firm.

"Simply put, LPL orchestrated, assisted and executed a classic corporate raid against LWM, its own affiliate, by the actions of three of LWM's employees, who were at the time also affiliated with LPL," the suit contends.

LWM had over $451 million in client assets under management on Dec. 5, 2018, when three LWM financial advisors left without notice and took client files with them, according to the suit, and was left with zero AUM the next day.

LPL induced the three to leave "en masse, in the middle of the night," despite the advisors' assurances that they would stay with the firm, according to the lawsuit.

Principal Mark Lamkin could have sold the firm that summer for $8 million to $10 million based on its book of business, the suit contends.

LWM and Lamkin were affiliated with LPL from early 2001 until late 2018, using LPL's platform and technology to manage client relationships, trades and accounts, the suit states.

The suit contends that in 2017, Lamkin and his firm started to question the affiliation with LPL over concerns arising from how the independent broker-dealer handled compliance issues in transactions for clients of a particular LWM advisor.

The situation was so problematic that Lamkin helped the clients in their efforts to be made whole, according to the lawsuit. Lamkin's actions "created bad blood between LPL and LWM such that LWM became a target for LPL to seek to destroy and take over LWM and Lamkin's business," the complaint says.

When Lamkin and LWM started looking for another broker-dealer, LPL retaliated by launching a "systematic, wrongful and intentional" effort to damage them, including conspiring with three other LWM advisors — Bruce Lindsay, Jonathan Upton and Gregory Smith — to steal clients from the firm, the lawsuit alleges. (LWM had purchased Lindsay's firm for $541,000 in 2015, the suit says.)

In addition, LPL engaged in a "witch hunt-type" probe of Lamkin and prompted the advisors to "steal clients" by causing them to fear that their livelihoods would be in jeopardy if they stayed with Lamkin's firm, according to the lawsuit.

Among other allegations, the complaint says that LPL encouraged the three advisors' departure from LWM, orchestrating the timing to cause unreasonable harm to the firm and provided a "false narrative" to the three advisors that LWM's clients actually belonged to LPL.

The three advisors, in coordination with LPL, lied to Lamkin about their intent to stay with LWM in order to delay Lamkin's switch to a new broker-dealer, the suit also alleges. It also contends that "Lamkin was wrongfully terminated without fair or adequate warning" from his LPL affiliation in August 2018, although other advisors at the firm could continue to advise clients on securities and execute trades for them.

Lamkin and LWM are currently affiliated with Calton & Associates.

LPL, looking for pretexts to damage Lamkin and LWM, alleged an error in the way that Lamkin reported a loan from a client, although LPL had advised Lamkin on how to structure the loan so it wouldn't need to be reported, the suit contends.

Financial Industry Regulatory Authority records show that in 2020, "without admitting or denying the findings," Lamkin consented to a $7,500 fine and 90-day suspension to findings that he borrowed $1,265 million from a customer whose account he serviced without notifying his member firm or obtaining its written approval.

"I fully admit to arranging a loan from a long time friend that I mistakenly believed was exempt from FINRA guidelines," Lamkin commented at the time, saying that "to this day, the friend is a client and fully supports our arrangement and agreement."

LWM claims several counts of tortious interference with the firm's business and seeks up to $10 million in damages based on fairness and equity and $10 million in punitive damages.

LPL doesn't comment on pending legal activity, a spokesperson told ThinkAdvisor by email Friday.

A phone message left Friday at Centris Wealth Management, where Lindsay, Upton and Smith are listed as the wealth advisor team, and another message sent through an online contact on the firm's website, weren't immediately returned.

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