“Note also this is about interest on retirement accounts in MerrillEdge, not other accounts and not involving our traditional Merrill platform,” Halldin said.
“It’s tough to say how much merit the case has. If what is alleged is true, it does have the possibility of getting over the motions to dismiss that inevitably are filed in class action lawsuits,” Andrew Stoltmann, principal, Stoltmann Law Offices, said.
“What’s interesting is most firms do precisely what is alleged that Merrill Lynch has done. If this case does have merit, I can promise you there will be a half dozen to a dozen more similar lawsuits filed against other major wire houses and brokerage firms as this is an extremely common practice,” Stoltmann added.
“This all links back to the fact that now that commissions have fallen to zero or near zero, firms were using the cash sweep programs to make up profits for a few years,” former Finra regulator Michael S. Edmiston said.
“It’s always a game of ‘Whack-a-Mole’ with firms. Finra or the SEC will put their thumb on something and firms will find their way around it to do something else,” said Edmiston, an investor attorney with the Law Offices of Jonathan W. Evans & Associates.
Edmiston noted that Charles Schwab settled SEC charges for $187 million in 2022 for allegedly directing clients to accounts the firm’s own internal analysis showed were less profitable for investors.
In November, Wells Fargo disclosed that their cash sweep programs were under SEC investigation. Finra has has made firm’s cash sweep accounts an exam priorities since 2021, he said.
“I see the next few years as a race between regulators bringing enforcement that will result in something for investors or firms settling out class action suits,” Edmiston predicted.