Edelman Accuses Prime Capital of Helping Advisors Take Client InfoEdelman Accuses Prime Capital of Helping Advisors Take Client Info
Edelman moved to add Prime Capital as a defendant in three ongoing lawsuits this week, arguing the firm helped departing advisors steal proprietary information and break non-solicitation vows.
Edelman Financial Engines is adding Prime Capital Financial as a defendant in three ongoing lawsuits, accusing the firm of helping former Edelman advisors steal confidential information and soliciting former clients.
Edelman is the defendant in the three pertinent cases, all brought by former Edelman advisors seeking to break their restrictive covenants after moving to Prime Capital.
Tim Dowden, Jared Copinga and Scott Szymula argued that their non-solicitation and confidentiality contracts were unenforceable. Dowden argued in his suit that they were used as cudgels to discourage him and other advisors from finding work elsewhere.
Edelman is adding Prime Capital into the three suits as a “third-party defendant” (which is when a defendant accuses an unnamed party of being liable for the issues at hand). According to an Edelman spokesperson, the move showed Edelman’s commitment to “protecting its proprietary information and putting an end to these unlawful practices.”
“These actions have been taken in response to the coordinated actions of Prme and its employees to unlawfully take (Edelman’s) confidential and proprietary business information and misappropriate our clients and the assets we manage for them,” the spokesperson said.
According to the new filing in the Dowden case (which mirrors the details of the two other filings), Edelman moved to add Prime Capital as a defendant after a Jan. 30 deposition of Dowden, in which his former firm claimed to uncover new details about his departure.
Edelman claimed Dowden retired without notice on Jan. 16, 2024, but he joined Prime Capital several days earlier. According to the filing, Dowden entered information about 240 Edelman clients by hand into a notebook (including names, contact information, average fee billing and AUM).
“Tellingly, when (Dowden) stole the client names and associated data from (Edelman’s) systems, instead of just printing the data or emailing it to himself, he wrote it down by hand over the course of 58 hard-copy pages,” the filing read. “The reason is plain: printing the data or emailing it would have left a trail for (Edelman) to discover, whereas clandestinely copying the information by hand would allow his wrongful conduct to go undetected.”
Edelman accused Prime Capital of knowing about the scheme, encouraging Dowden to obtain the information and then sending those clients “marketing campaigns and materials,” encouraging them to move their business from Edelman to Prime Capital.
Dowden also allegedly contacted hundreds of Edelman clients after he joined Prime Capital, urging them to follow him to the new firm. Edelman also alleged that Prime Capital agreed to indemnify Dowden for any loss, cost or liability (including attorney’s fees) for any lawsuits brought after he left Edelman, calling it “an insurance policy” for the advisor.
“Prime Capital’s motives are now clear. Prime Capital created the to-do list of tasks for (Dowden) to accomplish in connection with his ‘transition,’ which included stealing the client data from (Edelman’s) systems,” the filing read.
Prime Capital did not respond to a request for comment as of press time.
Several other former Edelman advisors who joined Prime Capital, including North Carolina-based advisor Josh Hederick and California-based advisor Jennifer Staben, also sued their former employer last year in an attempt to break their non-solicitation agreements.
Edelman is also locked in ongoing litigation with Mariner Wealth Advisors, accusing the firm of luring numerous advisors to break non-solicitation agreements and trade secrets.
Last month, in an amended filing, Edelman accused Mariner CEO Marty Bicknell of personally trying to entice at least one Edelman advisor to quit and join Mariner. The latter firm has denied Edelman’s accusations, accusing the firm of trying to “unlawfully stifle fair competition” to send a “chilling public message” to advisors leaving Edelman.
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