Robert Jackson, a former commissioner with the Securities and Exchange Commission, is partnering with a law firm to spearhead a new Cash Sweep Task Force to help brokerage customers who have been underpaid in what is estimated to be billions of dollars in interest cash sweep programs at major banks, brokerages and financial institutions.
The task force, launched by Bernstein Litowitz Berger & Grossmann LLP, is investigating Wells Fargo, Ameriprise Financial, LPL Financial and E-Trade, among others, "whose retail clients' cash balances were kept in accounts at heavily depressed interest rates, allowing the institutions to reap significant profits at their clients' expense," the firm said in a recent statement.
Jackson will be joined on the task force by Edwin Hu, a professor at the University of Virginia School of Law who previously served as an advisor to the White House's National Economic Council and as chief economist to Jackson at the SEC.
"For years, the SEC has warned that firms offering sweep accounts must take seriously their promises to pay reasonable interest on Americans' hard-earned cash," Jackson said in an email Friday.
As rates rose, "millions of Americans thought they were earning real interest — but many firms paid them peanuts, padding their profits instead," said Jackson, a professor of law at New York University School of Law. "Those who did so broke their promises to investors and turned cash-sweep accounts into a trillion-dollar conflict of interest."
Under both the Trump and Biden administrations, "the SEC has said that investors deserve better — and that's why I'm so proud to be a part of this effort to get Americans real returns on their hard-earned savings," Jackson relayed.
While the SEC "is doing its part to expose and put a stop to this activity," Jackson said, "retail customers need to take action to recover the monies they are owed."
As the law firm explained, "Sweeps are operated by banks and brokerages to move client cash into money-market or other higher-yield accounts in order to maximize its growth. In reality, institutions have largely aggregated customer cash into accounts paying a small fraction of yields otherwise available in today's high interest-rate environment."
Bernstein Litowitz Berger & Grossmann's Cash Sweep Task Force includes partners Jerry Silk, Avi Josefson, Adam Wierzbowski and Scott Foglietta, as well as associates Emily Tu and Nicole Santoro.
