Wells Fargo sued twice over cash sweep rates, LPL sued again
In the span of two days, three more lawsuits have been brought against brokerages over their cash sweep rates, including two cases against Wells Fargo and another against LPL.
Those add to other recent lawsuits over sweep rates filed against Merrill Lynch, Morgan Stanley, and Ameriprise, as well as a separate one LPL is facing. The cases also come as Wells Fargo last month indicated that it has changed pricing for cash sweeps at the cost of its net interest income and as the firm deals with an SEC investigation into its rates.
The lines of litigation allege that the brokerages violated their fiduciary duties to clients by providing relatively low rates on the non-traded cash assets, while the companies made large spreads on the money. The companies also allegedly failed to adequately disclose to clients that they had higher yielding options available for their cash.
“Designed primarily for short-term cash holdings, our FDIC-insured cash sweep vehicles prioritize security, liquidity, and yield – in that order,” LPL said in a statement. “We also offer investment options suitable for a longer-term horizon, such as money market funds, CDs, and fixed income funds. This flexibility allows our clients to tailor their investment strategies to align with their risk tolerance and financial goals.”
The recent lawsuit against that firm cites its cash sweep rates as a range from 0.35 percent to 2.2 percent, depending on the size of the account. Meanwhile, sweep rates at Vanguard and Interactive Brokers are 4.6 percent and 4.83 percent, regardless of account size, according to the complaint.
One of the lawsuits against Wells Fargo points to a range of 0.05 percent to 0.5 percent for the default cash option for Wells Fargo Advisors
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