Ex-Advisor Sues LPL, Citizens Bank & Trust Over Botched Transition

A former financial advisor who was fined and fired over allegations he sent private customer information to his prospective new employer, LPL Financial, has sued both LPL and his previous employer, Citizens Bank & Trust in Florida.

Nathan Adams, formerly employed as a Citizens financial advisor, alleges he was forced to resign in retaliation for pursuing a job at LPL, which he contends botched a background check during the recruiting process and fired him after he transferred $15 million in client assets.

In a lawsuit submitted Tuesday in state court in Polk County, Florida, against both companies and an LPL executive, Adams also notes that Citizens sought criminal charges against him alleging theft of trade secrets and scheme to defraud, among other violations.

Adams, who was registered through Citizens’ broker-dealer, Infinex Investments, and later through LPL, was arrested last year based on those allegations but the charges were later dropped, according to the lawsuit. (Infinex is now branded as Osaic Institutions.)

The Financial Industry Regulatory Authority fined Adams, also known as Nathaniel Adams, $5,000 in June and gave him a two-month suspension for allegedly misappropriating the personal information of 2,300 customers as he prepared to leave Infinex for LPL.

FINRA reported that Adams mailed the data, which was contained in a spreadsheet, to a family member, then forwarded it to an LPL contact without firm or customer consent.

Among other points, Adams contends in his lawsuit:

• He was forced to resign from Citizens in July 2022 after retaliatory actions that were triggered by LPL’s “negligent handling of a background check that mistakenly alerted Citizens to (his) potential departure.”
• LPL, through executive and financial advisor Eric Greenhow, a defendant in the case, and others, recruited Adams to join LPL as an associate financial advisor, promising compensation, bonuses, client acquisition support and assurances that his transition from Citizens would be handled smoothly and professionally.
• Adams and Greenhow entered into an agreement for additional monthly compensation that Greenhow was to pay directly to him.
• A detailed transition plan that Adams entered into with LPL regarding his resignation from Citizens and Infinex included steps to ensure compliance with non-compete and non-solicitation agreements.
• Adams transferred about $15 million in client assets to LPL and adhered to his transition and non-solicitation agreements, but LPL fired him in September 2022, despite promised upfront compensation, bonuses and legal support.

Adams also alleges that throughout the transition, LPL’s legal team gave him inconsistent and misleading advice, instructing him to transfer client information and collect publicly available data, “only to later face a cease-and-desist letter from Citizens.”

LPL failed to provide adequate legal protection, despite promises it would support him, the complaint alleges. Adams also contends that he had to represent himself in fighting the criminal charges, despite LPL’s promise to provide legal representation.

The former advisor claims breach of contract and fraudulent inducement against LPL and Greenhow, constructive dismissal against Citizens, negligence against LPL, and negligent interference with employment and intentional interference with contractual obligations against Citizens.

He also claims that all the defendants violated Florida’s Deceptive and Unfair Trade Practices Act.

In October 2022, LPL notified FINRA that it had terminated Adams’ registration because he failed to adhere to onboarding requirements concerning customer information maintained at his former broker-dealer, according to the authority.

An LPL spokesperson told ThinkAdvisor by email Thursday: “When we were made aware of the allegations regarding the advisor’s improper handling of client data, we promptly conducted an internal investigation, which resulted in the advisor’s termination with the firm in 2022.

“While LPL supports an advisor’s right to choose to move firms or establish their own business, any departure must be done while operating in good faith and adhering to regulatory requirements.”

A Citizens representative Thursday said the company had no comment on the lawsuit. Greenhow didn’t respond to a LinkedIn message seeking comment.

FINRA’s BrokerCheck database shows that in June, Adams accepted the fine and suspension without admitting or denying the authority’s findings. 

After Adams resigned, Infinex discovered the email and spreadsheet and informed LPL of its discovery, according to FINRA. The nonpublic personal customer information was deleted following reviews of all devices and email accounts, the authority reported.

Adams, who is currently unregistered, seeks a jury trial and compensatory and punitive damages.

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