SAN JOSE, Calif.—First Tech Federal Credit Union is taking two of the nation’s largest broker-dealers to court, alleging its former investment advisors stole confidential member information when they abruptly left to join competing firms, Yahoo Finance reported, citing a Wealth Management article.
The $17-billion First Tech has filed suit in federal court in Idaho against LPL Financial, Osaic, and several former employees, accusing them of the “deliberate misappropriation of trade secrets.” The complaint contends that departing advisors took privileged data detailing the credit union’s member relationships and investment portfolios, Yahoo Finance explained.
According to the filing, Idaho-based registered representatives Alfred “Jack” Jackson and Kristina Hernandez resigned without notice in September to join LPL, while Sage Kendall left at the same time to join Osaic. First Tech alleges the three coordinated their departures and improperly retained client lists and other confidential information belonging to the credit union.
First Tech Federal Credit Union is not itself a broker-dealer or registered investment advisor; instead, it provides investment services to members through Raymond James’ Financial Institutions Division and Financial Services Advisors, which are registered with FINRA and the SEC, respectively, Yahoo Finance noted.
According to SEC filings, advisor Jackson first registered with Raymond James in 2006, Hernandez joined the firm in 2024, and Kendall—who has worked with several broker-dealers since 2006—registered with Raymond James in 2012.
In its lawsuit, First Tech alleges the three conspired for months with one another and with their future employers before resigning on Sept. 9. The complaint states that Jackson and Hernandez joined LPL through Jackson’s newly created entity, Riverside, while Kendall affiliated with Osaic under the firm Family Tree, Yahoo Finance said.
According to the credit union, the night before their resignations, the advisors were observed copying stacks of confidential documents. The suit further claims Jackson’s portal activity—which provided access to member and client data—spiked from zero logins early in the year to as many as 13 to 19 times per month in the weeks leading up to his departure, Yahoo Finance said.
According to the complaint, the departing reps claimed they were protected by the Protocol of Broker Recruiting, established in the early 2000s to curb a rise in intra-broker/dealer lawsuits over departing advisors soliciting former clients after joining new firms. The protocol allows (but limits) resigning reps to take limited client information.
While LPL and Osaic are signatories to the protocol, First Tech argues that it has never signed the protocol, a fact that it alleges is well known to its financial advisors, Yahoo Finance stated.
“Given their intimate familiarity with the Protocol—coupled with the public nature of who is a Protocol member—it is unquestionable that both LPL and Osaic knew that First Tech was not a Broker Protocol member—yet each knowingly allowed their new hires to take and use a complete customer list anyway,” the complaint reads.
Additionally, while First Tech reps register with Raymond James (which is a Protocol signatory), First Tech argued that this doesn’t impact its case, and that while Raymond James’ Financial Institutions Division “may be able to waive its own rights, it lacks the authority to waive the rights of others.”
As CUToday.info has reported, NCUA has approved the merger between Digital Federal Credit Union and First Tech FCU, paving the way for the creation of a $28-billion institution that reaches across the country.