Cases / Current Cases

Merrill Lynch, Pierce, Fenner & Smith, Inc. - Sweep Accounts

Court Sustains Wolf Popper LLP’s Complaint Against Merrill Lynch in “Sweep” Account Class Action

In a January 25, 2021 Opinion and Order, Judge Valerie Caproni of the United States District Court for the Southern District of New York granted the motion of plaintiff Sarah Valelly, represented by Wolf Popper, for permission to file an amended class action complaint against Merrill Lynch, Pierce, Fenner & Smith Inc.  The amended complaint asserts that Merrill was contractually obligated to pay a “reasonable rate” of interest on uninvested cash in Merrill Edge retirement accounts and, in breach of that agreement, swept plaintiff’s uninvested cash into low-yielding money market deposit accounts maintained by Merrill’s indirect parent, Bank of America, N.A.  In her order, Judge Caproni observed that plaintiff’s proposed complaint sufficiently demonstrated that the rate Merrill paid on retirement sweep accounts “was significantly lower than the average rates paid by FDIC-insured banks on deposit accounts across the United States.”

The Court also granted plaintiff permission to amend her complaint to allege that Merrill failed to pay her the higher rate of interest available on “linked” accounts.  The Court observed that plaintiff “opened all three accounts under the same username and password,” that “Defendant’s website listed all three accounts together and displayed the aggregate balance of the accounts” and that “Plaintiff alleges that when she clicked on a hyperlink on Defendant’s website that said ‘Link your internal accounts…’ the website indicated that her three accounts were already linked.”  Judge Caproni concluded that these pled facts raised the inference that Merrill had breached the covenant of good faith and fair dealing. 

The case is Sarah Valelly v. Merrill Lynch, Pierce, Fenner & Smith Inc., Case No. 1:19-cv-07998-VEC (S.D.N.Y.).

Wolf Popper LLP is a nationally recognized law firm in the fields of securities litigation, consumer fraud, ERISA, antitrust, health care litigation, and corporate transactional/derivative litigation.

For more information, please contact Robert C. Finkel at or Adam J. Blander at

Wolf Popper LLP Files Class Action Complaint Against Merrill Lynch, Pierce, Fenner & Smith Inc. Challenging Merrill’s Low-Interest Sweep Account Practices

NEW York – August 27, 2019

Wolf Popper LLP has filed a class action complaint in the U.S. District Court for the Southern District of New York (Case No. 1:19-cv-07998) against Merrill Lynch, Pierce, Fenner & Smith, Inc.  The lawsuit challenges Merrill’s practice of defaulting customers into its lowest yielding “sweep accounts,” which currently provide a paltry 0.05% annual percentage yield on cash balances.  Merrill’s interest rates are dramatically below competitors’ rates of approximately 2.0%.  Moreover, Merrill fails to follow SEC rules in initiating client accounts, which require clients’ “prior written affirmative consent” before Merrill sweeps their cash.

Recently, on August 7, 2019, Fidelity Investments announced that it was challenging the “conventional industry practices by automatically directing investors’ cash into higher yielding options available for brokerage and retirement accounts as well as providing product choice.”  Fidelity emphasized, without naming Merrill specifically, that “customer research shows that many investors don’t focus on the rate paid on their cash when they open an account and, too often, they don’t take action later.”  Fidelity, according to its press release, makes it “easy for customers by automatically giving them the higher yielding option at account opening.”  The press release added that Fidelity’s approach “is contrary to typical industry practices of defaulting customers’ cash into a low-yielding product – often at an affiliated bank – with no other option.”

The lawsuit, among other things, seeks to compel Merrill to adopt transparent disclosure concerning cash investments and pay investors reasonable, market-based interest on cash balances.  The lawsuit also seeks payment of back interest.

Interested persons may contact Robert C. Finkel for more information concerning the litigation.

Contact:  Robert C. Finkel
              Wolf Popper LLP
              (212) 451-9620

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