EddieJayonCrypto
25 Jan 25
Two Wall Street giants, Wells Fargo and Bank of America's Merrill Lynch, are collectively paying $60 million to the U.S. Securities and Exchange Commission for allegedly prioritizing their own interests over clients'. The SEC claims the firms failed to establish proper policies for their cash sweep ...
Wells Fargo and Bank of America's Merill Lynch have been ordered to pay $60 million to the U.S. Securities and Exchange Commission for mishandling cash sweep programs, impacting advisory clients. The SEC found that the firms limited yields on these programs, allegedly prioritizing their own interests over clients' best interests. Sanjay Wadhwa, the SEC's Acting Director of Enforcement, stressed the importance of advisory firms prioritizing clients' best interests in evaluating cash sweep options.
Wells Fargo will pay a $35 million civil penalty, while Merrill Lynch will pay $25 million. Both firms settled with the SEC without admitting or denying the findings and agreed to censure and cease further violations.
The SEC alleges that Wells Fargo and Merill Lynch failed to establish proper policies for their cash sweep programs, offering low yields to clients despite a rising interest rate environment. According to the SEC, the firms profited from clients' uninvested cash by keeping the yields on these programs low. Investment advisors typically advise clients to move uninvested funds into bank deposit sweep programs, designed to generate interest instead of letting the money lay dormant. The SEC claims that Wells Fargo and Merill Lynch limited the yields paid out by these programs at a time when interest rates were rising.
Sanjay Wadhwa emphasized that these actions reinforce the importance of advisory firms having reasonably designed policies and procedures to consider their clients’ best interests when evaluating potential sweep options for cash held in advisory accounts. Wells Fargo and Merill Lynch settled with the SEC without admitting or denying the regulator’s findings. Wells Fargo has agreed to pay a $35 million civil penalty while Merill Lynch is set to pay $25 million. The firms also consented to be censured and to cease and desist from further violations of the Advisers Act.