Cases / Current Cases

Merrill Lynch, Pierce, Fenner & Smith, Inc. - Sweep Accounts


Wolf Popper LLP Files Class Action Complaint Against Merrill Lynch, Pierce, Fenner & Smith Inc. Challenging Merrill’s Low-Interest Sweep Account Practices

NEW York – August 27, 2019

Wolf Popper LLP has filed a class action complaint in the U.S. District Court for the Southern District of New York (Case No. 1:19-cv-07998) against Merrill Lynch, Pierce, Fenner & Smith, Inc.  The lawsuit challenges Merrill’s practice of defaulting customers into its lowest yielding “sweep accounts,” which currently provide a paltry 0.05% annual percentage yield on cash balances.  Merrill’s interest rates are dramatically below competitors’ rates of approximately 2.0%.  Moreover, Merrill fails to follow SEC rules in initiating client accounts, which require clients’ “prior written affirmative consent” before Merrill sweeps their cash.

Recently, on August 7, 2019, Fidelity Investments announced that it was challenging the “conventional industry practices by automatically directing investors’ cash into higher yielding options available for brokerage and retirement accounts as well as providing product choice.”  Fidelity emphasized, without naming Merrill specifically, that “customer research shows that many investors don’t focus on the rate paid on their cash when they open an account and, too often, they don’t take action later.”  Fidelity, according to its press release, makes it “easy for customers by automatically giving them the higher yielding option at account opening.”  The press release added that Fidelity’s approach “is contrary to typical industry practices of defaulting customers’ cash into a low-yielding product – often at an affiliated bank – with no other option.”

The lawsuit, among other things, seeks to compel Merrill to adopt transparent disclosure concerning cash investments and pay investors reasonable, market-based interest on cash balances.  The lawsuit also seeks payment of back interest.

Interested persons may contact Robert C. Finkel for more information concerning the litigation.

Contact:  Robert C. Finkel
              Wolf Popper LLP
              rfinkel@wolfpopper.com
              (212) 451-9620


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