On December 11, 2023, Wolf Popper LLP filed a class action complaint in the U.S. District Court for the Southern District of New York against Merrill Lynch, Pierce, Fenner & Smith, Inc. The complaint alleged that Merrill breached its contractual obligations to retirement account investors by failing to pay a “reasonable” rate of interest on cash swept to Merrill’s affiliate (Bank of America, N.A.). Rather than pay a reasonable rate of interest, the complaint alleged that Merrill defaulted retirement customers into low yielding “sweep accounts.” For example, as market interest rates rose beginning in March 2022 and into 2023, Merrill paid tier 1 and 2 retirement account investors (those investors with less than $1 million of assets under management) only 0.01% APY (annual percentage yield) interest on their swept cash, which is equivalent to $1 of interest on $10,000 in cash per year and over 500 times less than the contemporaneous federal funds rate.
The original complaint sought, among other things, damages on behalf of retirement customers resulting from Merrill’s failure to pay them a reasonable rate of interest and an injunction barring Merrill from continuing to pay an unreasonable rate of interest on retirement sweep accounts.
On April 8, 2025, the Court consolidated the action with related cases challenging Merrill’s cash sweep practices. On May 22, 2025, Plaintiffs filed the operative Consolidated Class Action Complaint, which asserts claims concerning Merrill’s retirement and non-retirement cash sweep programs. The Consolidated Complaint challenges three automatic cash sweep programs: the Retirement Asset Savings Program (“RASP”), which sweeps cash from retirement accounts, and the Merrill Lynch Bank Deposit Program (“MLBDP”) and Merrill Lynch Direct Deposit Program (“MLDDP”), which sweep cash from non-retirement accounts. The Consolidated Complaint alleges, among other things, that Merrill failed to pay reasonable rates of interest and failed to determine interest rates based on economic and business conditions. It seeks damages and injunctive relief on behalf of Merrill customers.
The filing of the class action was reported on by multiple publications. Some of the articles about this news are also linked herein. The operative amended Consolidated Class Action Complaint is also linked herein.
The consolidated case is In re Merrill Lynch Cash Sweep Programs Litigation, Case No. 1:23-cv-10768-MMG-BCM (S.D.N.Y.), pending before United States District Judge Margaret M. Garnett.
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