Wells Fargo, Morgan Stanley, and Bank of America are among several Wall Street banks facing accusations of depriving customers of billions of dollars in interest payments. According to a recent report, the U.S. Securities and Exchange Commission (SEC) is investigating these financial institutions to determine whether they intentionally steered clients into “cash sweep” accounts that generated little or no interest.
Cash sweep accounts are typically used to transfer idle cash into investment vehicles designed to earn interest. However, all three banks are now embroiled in proposed class action lawsuits, which claim that they prioritized their own profits by placing clients’ funds in low-interest options without providing adequate disclosure.
These allegations have come to light through recent quarterly filings with the SEC. In these filings, Wells Fargo disclosed that it is currently engaged in “resolution talks” with the SEC over the issue. Meanwhile, Morgan Stanley reported that the SEC began its inquiries into the matter in April. Bank of America also confirmed that it is under scrutiny.
Despite the growing concerns, none of the three banks have provided public comments on the ongoing investigations.
The scope of the issue extends beyond these three banks, as other financial firms such as LPL Financial and Ameriprise are also involved in lawsuits related to cash sweep accounts. LPL Financial has stated that it intends to “vigorously” defend itself against these allegations, while Ameriprise has not made any public statements regarding the matter.
