Federal Judge Dismisses Antitrust Lawsuit Against Major Investment Firms

A federal judge in Illinois has dismissed an antitrust lawsuit against major investment advisory firms, including Fidelity and Charles Schwab. The case, which alleged conspiracy to minimize industry competition, was ruled insufficient in its factual support.

U.S. District Judge LaShonda Hunt of the Northern District of Illinois, a court established in 1819, issued the ruling on Monday, September 9, 2024. Judge Hunt stated that the plaintiff's allegations were "heavy on theories and labels and light on details," describing the lawsuit as "lengthy, repetitive and convoluted."

The plaintiff, Stephen Greco, CEO of Spotlight Asset Group and a longtime investment advisor, filed the lawsuit in 2022. Greco, who served as Creative Planning's national director of wealth management from 2013 to 2017, claimed he had uncovered industry misconduct and collusion. He alleged that after filing complaints with the U.S. Securities and Exchange Commission (SEC) and the Department of Justice, he became subject to retaliation and harassment.

The lawsuit accused the defendants of various violations, including antitrust claims, fraud, interference with business contracts, and false advertising. Greco alleged that the investment firms were refusing to deal with Spotlight and disparaging it to hinder competition.

In response to the dismissal, Fidelity, founded in 1946, and Charles Schwab, established in 1971, welcomed the judge's decision. A Schwab representative noted that despite the complaint's length, it "still failed to lay out a plausible case."

The case highlights the complexities of antitrust law in the United States, which dates back to the Sherman Antitrust Act of 1890. The investment advisory industry, regulated under the Investment Advisers Act of 1940, operates within a framework of fiduciary duties rooted in English common law.

Judge Hunt has allowed the plaintiffs to file a proposed amended lawsuit by October 4, 2024. This decision underscores the importance of providing substantial factual evidence when alleging antitrust violations in the financial services sector.

The case, filed in the U.S. District Court for the Northern District of Illinois, is being closely watched by industry observers. It raises questions about competition and regulatory oversight in the investment advisory space, which has seen significant changes since the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

As the legal proceedings continue, the investment community remains attentive to potential implications for market competition and consumer costs in the financial services industry.