NEW YORK, February 6, 2024: Wolf Popper LLP has filed a class action complaint in the United States District Court for the District of New Jersey against E*TRADE Securities LLC ("E*TRADE") and its affiliate Morgan Stanley Smith Barney LLC ("MSSB") ("Defendants") alleging breach of contract arising from Defendants' failure to pay a "reasonable rate of interest" on cash swept from retirement accounts, as required under E*TRADE's Retirement Sweep Deposit Account Program Customer Agreement and IRA Disclosures. Since 2023, E*TRADE has been administered through MSSB and has operated as E*TRADE from Morgan Stanley.
In contrast to prevailing market trends, which show an increase in interest rates on many consumer financial products in recent years, sweep rates at E*TRADE remain unreasonably low, with rates as of February 6, 2024 at 0.01% for balances up to $499,999, 0.05% for balances between $500,000 and $999,999, and 0.15% for balances of $1,000,000 and above. By comparison, as of February 6, 2024, the Federal Funds target rate set by the Federal Reserve is between 5.25 to 5.50%. The 0.01% paid by Defendants is equivalent to $1 of interest on $10,000 in cash per year.
Sweeping brokerage cash to affiliated entities—which, it is alleged, is a clear conflict of interest incentivizing banks to underpay customers—is not unique to E*TRADE and Morgan Stanley, but is also practiced at other prominent institutions like Merrill Lynch and Wells Fargo.
Wolf Popper LLP serves as lead counsel for plaintiffs and the putative class. The complaint, among other things, seeks damages on behalf of retirement customers and an injunction barring Defendants from continuing to pay an unreasonable rate of interest on retirement sweep accounts.
Retirement accountholders who would like to discuss their rights with respect to the interest rates paid on swept cash should contact Robert Finkel at (212) 451-9620, or rfinkel@wolfpopper.com.
Attorney Advertising: Prior Results Do Not Guarantee A Similar Outcome.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.