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 OCC's approval of SmartBiz buying a bank opens the door to other fintech M&A deals for accessing bank charters, which can help a fintech stay in business.
Provident Bank's Tara Brady was promoted to chief experience officer; the Federal Reserve ended its enforcement action against Nano Banc; Jim Nussle announced plans to retire as CEO of America's Credit Unions; and more in this week's. banking news roundup.
The Fitzgerald-based Colony Bankcorp agreed to pay $3.5 million to purchase an agency in Monroe, Georgia. The deal signals the potential return of more banks buying insurers than selling them.
The Department of Justice said in a court filing Friday that a February stop-work order from acting Consumer Financial Protection Bureau Director Russell Vought did not entail stopping statutorily mandated work by the bureau, defying earlier testimony.