Cases & Investigations
E*TRADE Cash Sweep Consumer Litigation

Wolf Popper LLP serves as Court-appointed interim lead counsel for a class of brokerage customers in a suit alleging that E*TRADE Securities LLC (“E*TRADE”) and Morgan Stanley Smith Barney LLC (“MSSB”) paid unreasonably low rates of interest on customers’ sweep accounts.
 
In 2023, MSSB assumed custody, clearing, and investment advisory services from E*TRADE, now known as E*TRADE from Morgan Stanley.  E*TRADE engages in a conflicted transaction by sweeping investor cash to its affiliated banks, Morgan Stanley Bank, N.A., and Morgan Stanley Private Bank, N.A.   These sweep accounts maintained unreasonably low interest rates.  For example, in contrast to prevailing market trends, rates at E*TRADE remained stagnant, with interest rates as of January 31, 2024 at 0.01% for balances up to $499,999, 0.05% for balances between $500,000 and $999,999, and 0.15% for balances of $1,000,000 and above.  At approximately the same time, the Federal Funds target rate set by the Federal Reserve (and intended to guide rates at U.S. banks) was at 5.25 to 5.50%.  The sweeping of billions of dollars in customer cash equates to “nearly free money for Morgan Stanley to generate interest income.”  See Barron’s, “Inside Morgan Stanley’s Success—and What’s Ahead,” April 8, 2023.  
 
Plaintiffs allege that E*Trade and MSSB’s practices violate various obligations they owe to their customers, such as the requirement in certain of their brokerage agreements that sweep deposits “bear a reasonable rate of interest.” As a result of E*TRADE and MSSB’s conduct, accountholders across the country have missed out on valuable interest payments.  

Phone: Robert Finkel – (212) 451-9620
Phone: Adam Blander – (212) 451-9667
Phone: Emer Burke – (212) 451-9625
Email: Outreach@wolfpopper.com
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