SEC Settles Charges With Wells Fargo And Merrill Lynch Over Cash Sweep Violations

According to Odaily, the U.S. Securities and Exchange Commission (SEC) has announced a settlement with Wells Fargo and Merrill Lynch over violations related to their cash sweep programs. The two advisory firms have agreed to pay a combined civil penalty of $60 million. The settlement addresses the firms' failure to implement adequately designed written policies and procedures to prevent violations of the Advisers Act and related rules concerning their cash sweep programs. The SEC's order reveals that Wells Fargo Advisors and Merrill Lynch offered a bank deposit sweep program (BDSP) as the sole cash sweep option for most advisory clients. The firms and their affiliates set the interest rates provided in the BDSP, and during periods of rising interest rates, the yield differential between the BDSP and other cash sweep alternatives sometimes widened to nearly 4%. This arrangement allowed the firms to gain substantial economic benefits from the advisory clients' cash in the BDSP.