SEC looks at Morgan Stanley’s cash in advisory accounts
The months long concern over interest rates that broker-dealers pay on cash clients hold in investment advisory accounts took another turn this past week, with Morgan Stanley on Monday revealing that the Securities and Exchange Commission is seeking “information” about certain accounts and Wells Fargo & Co. last week disclosing it is attempting to resolve the SEC’s investigation into such cash accounts.
Morgan Stanley and Wells Fargo are not alone facing such questions. “My understanding is that a lot of firms are facing these types of discussions with the SEC,” said one Wall Street veteran, who spoke anonymously to InvestmentNews about yields on cash in advisory accounts.
Broker-dealers profit from cash held in client accounts, margin loans used to buy more securities and banking activity in general. And now that interest rates have spiked from near zero at the start of 2022 to more than 5%, the SEC has made several inquiries about whether firms are maximizing returns on client cash in advisory accounts.
Wells Fargo revealed last year that it was facing an “advisory account cash sweep investigation” by SEC, and that the commission “has undertaken an investigation regarding the cash sweep options that the company provides to investment advisory clients at account opening.”
The issue again gained traction last month when banks, wirehouses and brokerage firms informed investors when they released second quarter earnings that they were increasing yields on cash in advisory accounts, sending the share price of many firms tumbling due to fears of lost profits.
“Since April 2024, [Morgan Stanley] has been engaged with and is responding to requests for information from the Enforcement Division of the SEC regarding advisory
Read more on investmentnews.com
