Osaic Hit With Class Action Over Low Cash Sweep Interest Rates

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Two Osaic customers filed a class action lawsuit in Arizona federal court alleging the brokerage firm kept interest rates on cash sweep accounts — accounts where uninvested cash from brokerage, advisory, and IRA accounts is automatically moved into interest-bearing deposits — "artificially low" while collecting higher "fees" from the participating banks that held the cash. The complaint claims Osaic made significant profits on client cash balances while clients earned less than they would from comparable low-risk instruments, and that even when the Federal Reserve raised interest rates over the past several years, Osaic kept its sweep rates steady. The plaintiffs compared Osaic's rates unfavorably to those of competitors including Vanguard, Fidelity, and Baird, and are seeking actual and punitive damages. Osaic denied the allegations and said it will defend the matter vigorously. This suit is part of a broader wave of similar class actions across the industry; the SEC settled related charges against Merrill Lynch and Wells Fargo in January 2025 and has since closed or dropped inquiries into Morgan Stanley and LPL Financial.