Wells Fargo and Merrill Lynch Settle SEC Charges Involving Cash Sweeps

Core View - Wells Fargo and Merrill Lynch settled SEC charges related to violations of Advisers Act rules in their cash sweep programs, with penalties totaling $60 million [1][2] - The firms failed to prioritize clients' best interests when selecting cash sweep options and managing advisory account cash [1][3] Settlement Details - Wells Fargo Clearing Services agreed to pay a civil penalty of$28 million [2] - Wells Fargo Advisors Financial Network agreed to pay a civil penalty of $7 million [2] - Merrill Lynch agreed to pay a civil penalty of$25 million [2] SEC Allegations - The firms set interest rates for their bank deposit sweep programs (BDSPs), with yield differences reaching nearly 4% compared to other cash sweep alternatives during rising interest rates [2] - Advisory firms must have policies to ensure cash in advisory accounts is managed in line with clients' investment profiles [3] Company Responses - Wells Fargo stated the settlement resolves a broader industry matter and that the issues have already been addressed [4] - Merrill Lynch claimed it took significant steps before the SEC investigation, including increasing rates for advisory clients and lowering investment thresholds for money market funds [5] Industry Context - Several financial institutions faced lawsuits in August for allegedly paying unreasonably low interest rates in cash sweep programs [5]