SEC Scrutiny Intensifies Over Cash Management in Advisory Accounts

Posted on August 20th, 2024 at 11:13 AM
SEC Scrutiny Intensifies Over Cash Management in Advisory Accounts

From the desk of Jim Eccleston at Eccleston Law

InvestmentNews reports that recent developments have intensified concerns about how broker-dealers manage cash in investment advisory accounts. Morgan Stanley and Wells Fargo & Co. are currently under scrutiny from the Securities and Exchange Commission (SEC) regarding their handling of client cash balances.

Morgan Stanley recently disclosed that the SEC is seeking information about specific advisory accounts. This follows Wells Fargo's announcement last week that it is negotiating with the SEC over an investigation into its cash sweep practices in advisory accounts.

Both firms are not alone; many broker-dealers face similar inquiries. According to InvestmentNews, with interest rates rising sharply from near zero in early 2022 to over 5 percent, the SEC is focusing on whether firms are optimizing returns on client cash.

Wells Fargo had previously revealed an ongoing SEC investigation into its cash sweep options provided to advisory clients. The SEC is examining whether these options were appropriately disclosed at account opening.

Morgan Stanley reported that since April 2024, it has been responding to the SEC's request for information related to advisory account cash balances and compliance with the InvestmentAdvisers Act of 1940.

 

Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.

Tags: eccleston, eccleston law, sec

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