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.
Processing Content
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 sixth bank failure this year shows that even as the industry overall is very profitable, there are pressures on a lot of banks that aren't the biggest.
Bankers have taken out ad buys against incumbent Republican Senator Roger Marshall of Kansas as he struggles to hold what has traditionally been a ruby-red Senate seat.
The $736 million Orange County bank had faced a smattering of enforcement actions over the years, including for concentration risks, governance issues and questionable insider transactions.
As the U.N. renews its call for $1.3 trillion a year in climate finance, four leaders in climate finance say the biggest question for advisors is where that money goes.
The National Association of Insurance Commissioners responded to a query from Sen. Elizabeth Warren about risks to policyholders stemming from private-equity ownership of life insurers.
