On January 17, COINOTAG News highlighted a significant enforcement action by the U.S. Securities and Exchange Commission (SEC). The SEC has imposed settlement charges on two prominent advisory firms, Wells Fargo and Merrill Lynch, amounting to a total of $60 million in civil penalties. The SEC’s action stems from the firms’ inadequate compliance with the regulations set forth in the Investment Advisers Act, specifically regarding their cash settlement practices.
Both Wells Fargo Advisors and Merrill Lynch Pierce Fenner & Smith reportedly neglected to implement sufficient written policies that would effectively mitigate violations associated with cash settlements. The SEC’s order notes that these firms utilized their Bank Deposit Sweep Programs (BDSP) as the primary cash sweep method for a majority of their advisory clientele, deriving considerable economic advantages from the cash held in such programs. The investigation further revealed that the firms controlled the rates offered within these programs, with discrepancies in yield spreads that could reach nearly 4% during periods of rising interest rates.