What Is a Cash Sweep? Brokerage Sweep Lawsuits

By Steve Levine · Updated July 4, 2026 · 7 min read

Quick Answer

A cash sweep is a brokerage or advisory program that automatically moves ("sweeps") your uninvested cash into an interest-bearing account at the end of each day — most often a deposit account at a bank affiliated with the brokerage. The firm typically earns much more on that cash than the interest it credits back to you, and that spread is the center of a wave of class action lawsuits against major brokerages and a combined $60 million SEC penalty paid by two Wells Fargo advisory firms and Merrill Lynch in January 2025. The suits allege breach of fiduciary duty, breach of contract, and unjust enrichment; the firms deny wrongdoing, and courts have so far reached mixed results.

On this page

What Is a Cash Sweep?
How Brokerages Make Money on Swept Cash
Why Cash Sweeps Triggered Class Actions
SEC Enforcement: The $60 Million Penalty
Where the Cash Sweep Lawsuits Stand
What Account Holders Can Do
Frequently Asked Questions
Sources

What Is a Cash Sweep?

When you sell a stock, receive a dividend, or deposit money into a brokerage account, that cash usually doesn't sit idle as a raw balance. Instead, the brokerage automatically transfers — "sweeps" — it into a designated holding vehicle at the end of each business day. That destination is the cash sweep account, and the arrangement as a whole is the firm's cash sweep program.

The sweep destination is usually one of two things: a bank deposit sweep program (BDSP), where the cash becomes a deposit at one or more banks — very often banks affiliated with the brokerage itself — and earns FDIC insurance up to the applicable limits; or a money market fund sweep, where the cash buys shares of a money market mutual fund. The sweep is the default setting in most brokerage and advisory accounts. Many customers never choose it, never think about it, and don't realize their uninvested cash has been earning interest at a rate the brokerage set.

How Brokerages Make Money on Swept Cash

The economics are simple. The affiliated bank that receives the swept deposits can lend that money out or invest it at prevailing market rates. The customer is credited whatever sweep rate the program sets. The difference between what the firm earns on the cash and what it pays the customer — the spread — is revenue for the firm.

During the 2022–2024 rate cycle, that spread became enormous. While the Federal Reserve pushed benchmark rates above 5% and money market funds paid comparable yields, many bank deposit sweep programs continued crediting customers as little as 0.01% to 0.5% on uninvested cash. One class action complaint alleged that Morgan Stanley earned roughly $8 billion in 2023 by deploying customers' swept cash through affiliated bank accounts while paying those customers rates in that bottom range. (That figure is the plaintiffs' allegation, not an adjudicated finding.) The wider the gap between market rates and sweep rates, the more the default setting was worth to the firms — and the more customers were arguably leaving on the table.

Why Cash Sweeps Triggered Class Actions

Starting in 2024, proposed class actions were filed against a long list of brokerages and wealth managers over their cash sweep programs — firms named in the litigation include Morgan Stanley, Wells Fargo, Merrill Lynch, Charles Schwab, Ameriprise, LPL Financial, Raymond James, UBS, JPMorgan, E*Trade, Robinhood, and others. The core legal theories are consistent across the cases:

Breach of fiduciary duty — the plaintiffs allege that firms acting as investment advisers (or otherwise owing duties to their customers) had an obligation to seek reasonable rates on client cash, and instead steered it into affiliated banks whose low rates benefited the firm at the client's expense.
Breach of contract and the implied covenant of good faith — claims that account agreements promising reasonable or market-linked treatment of cash were violated by rock-bottom sweep rates.
Unjust enrichment — the theory that the firms kept a windfall (the spread) that in fairness belonged to the customers whose cash generated it.

The defendants deny the allegations. Their central responses: sweep rates and the affiliated-bank structure were disclosed in account documents; customers were free to move cash into higher-yielding alternatives at any time; and a brokerage's duties do not include guaranteeing any particular interest rate on uninvested cash. No court has found any of these firms liable, and no classes had been certified in the major cases as of this writing.

SEC Enforcement: The $60 Million Penalty

Regulators moved in parallel with the private lawsuits. On January 17, 2025, the SEC announced settled charges against two Wells Fargo advisory firms and Merrill Lynch over compliance failures relating to the cash sweep programs they offered advisory clients. According to the SEC's orders, the firms offered bank deposit sweep programs as the only cash sweep option for most advisory clients, received significant financial benefits from those programs, and failed to adopt policies reasonably designed to ensure the sweep option was in clients' best interest as rates rose.

Wells Fargo Clearing Services agreed to pay a $28 million civil penalty, Wells Fargo Advisors Financial Network agreed to pay $7 million, and Merrill Lynch agreed to pay $25 million — a combined $60 million. The firms consented to the SEC's orders, which found violations of the Investment Advisers Act, without admitting or denying the findings. Notably, the SEC has also closed other cash sweep inquiries without action: it ended its investigation of Morgan Stanley's sweep program in May 2025 and dropped a similar probe of LPL Financial, in each case without enforcement.

Where the Cash Sweep Lawsuits Stand

The private litigation has produced a genuinely mixed scoreboard, with courts drawing a distinction between advisory relationships (where fiduciary duties are strongest) and self-directed brokerage accounts:

Motions to dismiss denied — courts have allowed cash sweep cases to proceed against firms including Merrill Lynch, Ameriprise, and Robinhood, keeping the core low-rate claims alive.
Dismissals and partial dismissals — a federal court in California trimmed the Wells Fargo case, dismissing breach-of-contract, unjust-enrichment, and fiduciary-duty claims for non-advisory customers while other allegations continue. Early cases against Merrill and Charles Schwab were dismissed (the Merrill plaintiffs refiled), and a federal judge rejected the argument that U.S. Bank owed a fiduciary duty on uninvested brokerage cash. In an Arizona case against Osaic, the court let some claims proceed but held that for certain accounts the relationship did not rise to a fiduciary duty.
Rate changes in the market — amid the scrutiny, several firms raised sweep rates on advisory-account cash in 2024, a shift analysts attributed in part to the litigation and regulatory pressure.
The first major settlement — in May 2026, Oppenheimer & Co. agreed to a $70 million classwide settlement over its Advantage Bank Deposit Program, and a court-approved claim process is now open. See our Oppenheimer cash sweep settlement page for the class definition and the September 17, 2026 claim deadline.

The practical upshot: as of mid-2026 most of these cases are still live lawsuits, but the Oppenheimer settlement shows the path a classwide resolution takes — notice goes out to eligible account holders through a court-appointed settlement administrator, and the claim details get listed on our open settlements page.

What Account Holders Can Do

Whether or not the lawsuits produce recoveries, the underlying issue is one every brokerage customer can act on today:

Find your sweep rate. Your brokerage publishes its current sweep rates — usually tiered by balance — in the cash sweep disclosure on its website and in your account documents. Compare it to what money market funds are paying.
Don't treat the default as the only option. In most accounts you can move idle cash into a purchased money market fund, Treasury bills, or a high-yield alternative yourself. The sweep only governs cash you leave uninvested.
Watch for settlement notices. If a cash sweep class action settles, notice typically arrives by mail or email from the settlement administrator. Legitimate administrators never charge a fee to file or "release" a payment — anyone demanding money to register you for a cash sweep settlement is running a scam.

For how these cases would work procedurally if they settle, see our explainers on class certification and pro rata settlement distributions.

Frequently Asked Questions

What is a cash sweep account?

A cash sweep account is the destination a brokerage automatically moves ("sweeps") your uninvested cash into at the end of each day — usually a deposit account at a bank affiliated with the brokerage, or sometimes a money market fund. The cash earns interest there until you invest it or withdraw it. Sweeps are the default in most brokerage and advisory accounts, so many customers don't realize their idle cash is sitting in one.

Why are there class action lawsuits about cash sweeps?

Plaintiffs allege that brokerages swept customer cash into affiliated banks that paid customers a small fraction of prevailing interest rates — sometimes 0.01% while market rates were around 5% — and kept the difference as revenue. The lawsuits claim this breached fiduciary duties, account contracts, or unjustly enriched the firms. The defendants deny wrongdoing, and courts have reached mixed results: some claims have been dismissed while cases against other firms have been allowed to proceed.

Did the SEC take action over cash sweep programs?

Yes. In January 2025, two Wells Fargo advisory firms and Merrill Lynch agreed to pay a combined $60 million in civil penalties to resolve SEC charges of compliance failures relating to their bank deposit sweep programs for advisory clients. The firms consented to the SEC's orders without admitting or denying the findings. The SEC has closed some other cash sweep investigations, including probes of Morgan Stanley and LPL Financial, without enforcement action.

Is there a cash sweep settlement I can file a claim for?

Yes — Oppenheimer & Co. agreed to a $70 million settlement over its Advantage Bank Deposit Program, and customers who participated from March 17, 2022 through May 22, 2026 can file a claim by September 17, 2026. Most other private cash sweep class actions are still being litigated, so there is no claim form in those cases yet. When a settlement is reached, the court-appointed administrator notifies eligible account holders. Beware of anyone charging a fee to "register" you for a cash sweep settlement — that is a scam pattern.

How do I find out what my brokerage pays on swept cash?

Check your account's cash sweep disclosure — brokerages publish their current sweep rates, usually tiered by account balance, on their websites and in account documents. If the rate is far below what money market funds or high-yield savings accounts pay, you can typically move idle cash into a purchased money market fund or another cash-equivalent yourself; the sweep is only the default, not the only option.