The US Securities and Exchange Commission (SEC) headquarters in Washington, DC, US, on Thursday, May 9, 2024. The US Securities and Exchange Commission is scrutinizing statements that Boeing Co. made about its safety practices following a near-tragic January accident aboard one of its 737 Max 9 planes. Photographer: Tierney L. Cross/Bloomberg
Tierney L. Cross/Bloomberg
Investment advisor units of Wells Fargo & Co. and Bank of America Corp.'s Merrill Lynch shortchanged customers by funneling uninvested cash into sweep accounts that benefited the banks but not their clients, the U.S. Securities and Exchange Commission alleged Friday.
The firms paid $60 million to settle the claims without admitting to or denying the regulator's allegations.
Wells Fargo Clearing Services agreed to pay a civil penalty of $28 million; Wells Fargo Advisors Financial Network, $7 million; and Merrill, $25 million, according to the SEC's cease-and-desist orders.
Wealth advisers direct clients into so-called cash sweep accounts before customers make investment decisions. These accounts are supposed to let customers earn more interest than if they sat on piles of uninvested cash.
Both Wells Fargo and Merrill for several years offered only one cash sweep option for most of their clients and these accounts delivered paltry returns, the SEC said.
"Merrill took several significant steps before becoming aware of the commission's investigation, including increasing the rates paid to advisory clients in Merrill's Bank Deposit Program, lowering the minimum thresholds for investing cash in certain money market funds, and adopting and implementing enhanced supervisory procedures," a representative for Merrill said in an emailed statement.
A Wells Fargo spokesperson said the agreement with the SEC "puts this broader industry matter behind us, and as the settlement states, we have already successfully addressed the issues covered by the resolution."
Regulators have been zeroing in on cash sweep account practices, probing them about their duties to act in the best interest of clients.
Customers also have filed proposed class actions against several big banks, including Charles Schwab Corp. and JPMorgan Chase & Co., and Wells Fargo.
Nicola M White and Katherine Doherty, Bloomberg News
The Federal Open Market Committee voted to reduce interest rates by 25 basis points Wednesday, but the emergence of dissents on the committee makes the chance of another quarter-point cut in December less certain.
American Banker's 2025 Small Business Banking conference yielded lessons about the need for speed, simplicity and safety in small-business lending. Other key takeaways included the significance of digital payment options and the importance of continuing to process SBA loan requests during the government shutdown.
The legacy money transfer firm plans to launch USDPT, a coin designed to improve international payment processing. That and more in the American Banker global payments and fintech roundup.
Credit analysts say climate risk could still pose a financial threat to financial institutions, even though the federal government has taken an ax to Biden-era climate guidance.
The bank technology company, which faces market pressure from fintechs, cut its outlook by about 20% and restructured its leadership following the departure of former CEO Frank Bisignano to the Trump administration.
