Advisor Hub on SEC and Wells Sweeps
Website Advisor Hub writes that, "Wells Fargo Faces SEC Investigation Over Cash Sweep Programs." They tell us, "The Securities and Exchange Commission is investigating Wells Fargo & Company over cash sweep options provided to investment advisory clients, the company disclosed in a filing on Tuesday. The investigation focuses on cash sweep options provided to customers at the time of account opening, according to the filing, which did not provide any additional detail. A spokesperson for the company's Wells Fargo Advisors brokerage unit declined to comment." The piece says, "Wells Fargo Advisors has three sweep options for customer cash in advisory accounts, including two that deposit cash in interest-bearing bank accounts and a third that purchases money market funds. When clients open an account, they are placed into a default option based on the type of account and advisory program they are using, according to the filing. As of Tuesday, the bank deposit sweep rates, which scale upwards based on assets, range from 0.15% for households below $1 million and peak at 1.30% for those with $20 million or more." They add, "The SEC has brought several cases over cash sweep conflicts in the past two years, including a high profile example from 2022 in which Charles Schwab Corp. agreed to pay $187 million for failing to fully disclose the impact that its cash sweep program had on customer returns. In late September this year, AssetMark Inc., a Concord, California-based money manager, agreed to pay more than $18 million to settle charges that included failing to properly disclose millions of dollars in revenue sharing payments from third-party custodians in its cash sweep programs. Missouri-based advisory firm Huntleigh Advisors, Inc. and an affiliate in February agreed to pay almost $894,000 to settle allegations from the SEC that they failed to disclose revenue sharing payments that an affiliated broker-dealer received and shared with the RIA tied to investments in cash sweep vehicles. In May 2022, First Republic Bank agreed to pay $1.8 million to settle an SEC case over failing to disclose a conflict in placing customers in certain mutual fund share classes and cash sweep accounts." For more, see our latest Brokerage Sweep Intelligence and see Wells Fargo's latest 10-Q, which says "Under 'Legal Actions'," "ADVISORY ACCOUNT CASH SWEEP INVESTIGATION. The United States Securities and Exchange Commission (SEC) has undertaken an investigation regarding the cash sweep options that the Company provides to investment advisory clients at account opening."
