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LPL Financial Faces Lawsuit Over Low Interest Rates in Cash Sweep Programs

Posted on August 5th, 2024 at 9:46 AM
LPL Financial Faces Lawsuit Over Low Interest Rates in Cash Sweep Programs

From the desk of Jim Eccleston at ÍøÆØ³Ô¹Ï

LPL Financial is the latest target of a lawsuit concerning the interest rates it offers on uninvested cash held in customer accounts. Financial Planning reports that the suit accuses LPL of breach of fiduciary duty, breach of contract, and unjust enrichment among other claims, concerning its cash sweep programs.

According to the lawsuit, LPL deposited its customers' uninvested cash into bank accounts that generated significant returns for the company, while customers received only minimal interest. The suit claims that customers were required to participate in these cash sweep programs to open accounts with LPL.

The lawsuit highlights LPL's reported returns on assets to illustrate the substantial profits the firm earned. For example, in the first quarter of this year, LPL's reported return-on-asset profits reached 11.8 percent, which represented 37.3 percent of the firm's total return on assets. In contrast, the suit alleges that customers earned only 0.35 percent in interest on accounts with up to $150,000, with slightly higher rates for larger balances — up to 2.2 percent for accounts holding more than $10 million.

LPL is not the only firm facing criticism and legal action over low interest rates in cash sweep programs. Merrill Lynch and Morgan Stanley also face similar lawsuits, accusing them of profiting at the expense of their customers by offering low rates compared to other brokerages and advisory firms.

 

ÍøÆØ³Ô¹Ï LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.

Tags: eccleston, eccleston law

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