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Merrill Lynch settles cash sweep lawsuit over near-zero interest rates

Merrill Lynch settles cash sweep lawsuit over near-zero interest rates

Money Moves

Bank of America unit will pay $39 million; a second, broader lawsuit still looms

2 days ago: Second Merrill cash sweep lawsuit advances

Overview

Updated 1 hour ago

Merrill Lynch agreed to pay $39 million to settle a class action that said it paid retirement-account customers near-zero interest on idle cash. The deal, filed Sept. 30 in Manhattan federal court, awaits approval from US District Judge Valerie Caproni.

The settlement is one piece of an industry-wide reckoning over cash sweep programs that park uninvested money in low-yield deposit accounts. Merrill faces a second, broader lawsuit covering retirement and non-retirement accounts, and it paid $25 million to the SEC in January 2025 over similar practices.

Why it matters

Merrill's $39 million payout signals brokerages can't pay near-zero rates on idle customer cash—interest that belongs to investors.

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Key Indicators

$39 million
Settlement amount
Merrill will pay this to resolve the class action over retirement cash sweep rates.
0.05% to 0.14%
Annual yield on swept cash
Rate Merrill's sweep accounts paid during the class period, from December 2016 to March 2020.
~2%
Rate rivals paid
What other brokerages paid customers on idle cash during the same period.
$64 million
Total Merrill has paid
Combines the SEC's $25 million penalty from January 2025 and the $39 million settlement.

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People Involved

Organizations Involved

Timeline

January 2025 October 2026

4 events Latest: 2 days ago
Tap a bar to jump to that date

Scenarios

1

Judge approves $39 million Merrill settlement

Likely Resolves by Q2 2027

Discussed by: Reuters and court observers

Judge Caproni grants final approval, ending the case that covers Merrill Edge accounts from December 2016 to March 2020. Customers receive their share and Merrill, which denies wrongdoing, avoids a trial scheduled for mid-October.

2

Second Merrill lawsuit settles for a larger amount

Possible Resolves by End of 2027

Discussed by: Reuters

The broader case before Judge Garnett covers retirement and non-retirement accounts. A settlement would likely exceed $39 million because it spans more accounts and a longer period, mirroring how Merrill settled the first case to avoid trial.

3

Second Merrill lawsuit goes to trial

Unlikely Resolves by Q2 2028

Discussed by: Reuters

If the sides do not settle, Judge Garnett's case heads to trial. A loss could cost Merrill more than the class action, since her Sept. 30 ruling let customers try to prove Merrill breached its duty to pay a reasonable rate on swept cash.

Historical Context

2 moments from history that rhyme with this story — and how they unfolded.

2022

Charles Schwab cash sweep settlement (2022)

Charles Schwab agreed to pay $187 million to resolve claims over its cash sweep program, which paid customers low rates on uninvested balances while the firm earned higher yields on the money.

Then

The settlement became the industry's benchmark for cash sweep penalties.

Now

It signaled to brokerages that regulators and customers would demand market-rate interest on idle cash once rates began rising.

Why this matters now

Schwab's payment set the enforcement precedent that Merrill Lynch's $39 million deal and the SEC's $25 million penalty follow.

September 2026

Oppenheimer & Co cash sweep settlement (2026)

A Manhattan judge granted final approval to a $70 million settlement between Oppenheimer and customers over low-yield sweep accounts, ending one of the wave of similar lawsuits filed in 2023 and 2024.

Then

The approval closed a parallel case in the same court, days before Merrill's settlement was filed.

Now

It gave judges a recent benchmark for what low-yield sweep disputes are worth.

Why this matters now

The roughly 1.8 times larger payment shows how settlement sizes vary with the number of accounts and the period covered, a contrast that frames the second Merrill lawsuit.

Sources

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