Judge Dismisses Suit to Block Schwab Purchase of TD Ameritrade
A federal judge in New York has tossed a lawsuit seeking to block the pending $26 billion merger between Charles Schwab Corp. and TD Ameritrade Holding Corp., but said the small registered investment advisor filing the suit can refile if properly represented by a lawyer.
BlackCrown, an Old Westbury, Long Island RIA that specializes in M&A-related “sector” investments, alleged that the merger “would substantially lessen competition” and “would absolutely remove choice for smaller and start-up independent advisor firm [sic] such as BlackCrown” in the lawsuit it filed last week.
BlackCrown Chief Executive Franklin Tsung, who signed the complaint as a pro se litigant, did not return calls and messages for comment on whether he plans to refile.
Judge Woods’ one-page order did not address the merits of the lawsuit, and Schwab has not to date responded to the suit.
“We believe the complaint is baseless and we’ll respond at the appropriate time,” Schwab spokesman Peter Greenley said in an emailed statement.
BlackCrown alleged that the merger would violate antitrust statutes under the federal Sherman and Clayton antitrust acts by eliminating one of the “big four” custodians for RIA firms. Schwab, TD Ameritrade, Fidelity Investments and Bank of New York Mellon’s Pershing unit hold 80% of RIA customers’ $4 trillion of assets, according to the complaint.
BlackCrown’s regulatory ADV filing lists zero client assets and says the firm has a single investment advisory client. Another filing says it also operates an affiliated referral business called AppCrown LLC, “a wealth management operating system with a contextual integration system to integrate multiple back office custodians and clearing providers and third party applications into a cloud based CRM system.”
“The combination of Charles Schwab and TD Ameritrade’s respective custody businesses would substantially lessen competition through the horizontal integration of the two companies,” the lawsuit said, and would particularly disadvantage smaller independent firms overseeing less than $200 million of customer assets.
Tsung, whose LinkedIn profile describes BlackCrown as a “tenacious” private equity firm that expanded in 2018 to buy companies with $10 million to $50 million of earnings before interest, tax, depreciation and amortization, asked the court to enjoin the mega-merger and give BlackCrown “the right” to purchase TD Ameritrade’s custody business.
Tsung had been chief operating officer of AppCrown, a back-office and data services provider for RIAs, from December 2010 through May 2015, according to his LinkedIn profile.