Cash Sweep Lawsuits: What Survives After the 2026 Ruling
The SEC retreated and courts cut the early claims. Track which cash sweep theories survived, which firms are exposed, and where the next filings land.
Follow the Duty: How the Cash Sweep Cases Survived by Getting Narrower
The arithmetic behind cash sweep litigation has never been complicated. A brokerage holds a client's idle cash, sweeps it automatically into an affiliated bank, pays the client a fraction of a percent, and invests the money at prevailing rates.
When short-term rates sat near zero, the gap was academic. When the federal funds rate climbed past five percent, it stopped being academic.
Complaints filed since then describe clients earning 0.01 percent while the firm earned more than five, and in Morgan Stanley's case the spread reportedly produced more than $8 billion in 2023 alone.
That is a compelling story, and in 2024 it produced a flood of class actions against nearly every major brokerage. What happened next is the more interesting part. The Securities and Exchange Commission collected a modest settlement from two firms and then closed its other investigations.
Courts began cutting the marquee claims out of the cases. And the plaintiffs' bar, instead of retreating, rebuilt the theory around a narrower and more durable question: not whether the rate was too low, but whether the firm owed the client a duty in the first place.
The first wave was broad and largely undifferentiated
The early complaints treated the industry as a single defendant class. The four earliest cases in this set illustrate the pattern, and they read alike:
McCrary v. Merrill Lynch (S.D.N.Y., December 2023), a single breach-of-contract count on behalf of retirement account holders.
Estate of Sherlip v. Morgan Stanley (S.D.N.Y., June 2024), contract, fiduciary duty, and unjust enrichment, on behalf of brokerage, advisory, and retirement holders alike.
Peters v. LPL Financial (S.D. Cal., July 2024), fiduciary duty, unjust enrichment, California's unfair competition law, and contract in the alternative.
Mehlman v. Ameriprise (D. Minn., July 2024), fiduciary duty, unjust enrichment, and breach of express contract provisions.
The through-line is a claim that the firm failed to pay a reasonable rate of interest. The theory did not distinguish carefully between account types, and it leaned hardest on fiduciary duty, which for a broker-dealer is the most contestable ground available.
Then 2025 went badly for that version of the theory
Two things happened, and both cut against the broad approach.
The regulator narrowed its own case and then left. In January 2025 the SEC settled with two Wells Fargo advisory firms and Merrill Lynch for $60 million, split as $28 million, $7 million, and $25 million. The charge is worth reading closely, because it was not a claim that the rates themselves were unlawful.
It was a compliance-program failure under the Investment Advisers Act: the firms made bank deposit sweeps the only option for most advisory clients while taking a significant benefit from that cash, without policies designed to consider clients' best interests.
Within months the Commission closed its Morgan Stanley investigation and dropped its LPL inquiry. Several firms escaped enforcement entirely while still facing private suits.
Courts started trimming. In the LPL case, the court dismissed the fiduciary duty and breach of contract claims while allowing unjust enrichment and breach of the implied covenant of good faith and fair dealing to proceed.
A case against U.S. Bank was dismissed outright. Motions to dismiss were denied against Merrill, Ameriprise, and Robinhood, so the record was genuinely mixed, but the lesson was unmistakable: the fiduciary count, the emotional center of these complaints, was the most likely to be struck.
The February 2026 ruling that showed what survives
On February 12, 2026, Judge Lorna Schofield in the Southern District of New York allowed a proposed class action against JPMorgan to proceed in part. The surviving claims are the tell.
JPMorgan must face allegations that it breached deposit account agreements by failing to adjust interest rates based on business and economic conditions, and that it breached individual retirement account agreements by failing to pay a reasonable rate.
The complaint alleges the programs paid 0.01 to 0.03 percent while the federal funds rate and Treasury bills exceeded five percent.
Nothing about that ruling blesses the theory wholesale. But it identified where the claims have traction: in specific contractual language, and in retirement accounts, where a reasonable-rate obligation is easiest to locate.
Between the SEC's Advisers Act theory and Schofield's contract and IRA holdings, a pattern had emerged by early 2026. The claims that keep surviving are the ones anchored to an identifiable duty, not to a general sense that the rate was unfair.
Tracking this wave? Our cash sweep trend report maps every filed case, defendant, account type, and surviving theory in one place, updated as each ruling lands. As well as identifying who's next. See the full tracker.
The 2026 complaints are built to that pattern
Four cases filed in June and July 2026 show the adaptation clearly, and they differ from the 2024 wave in two deliberate ways.
First, they target where fiduciary duty is strongest. Corkum v. Janney Montgomery Scott (E.D. Pa., June 2026) does not plead a general customer class. It pleads a Non-IRA Advisory Account Class and an IRA Advisory Account Class, confining the case to advisory relationships.
Treadway v. Betterment (S.D.N.Y., July 2026) goes further and pleads the defendant as a registered investment adviser subject to the fiduciary standard under the Advisers Act. A broker-dealer can argue it owes no continuing fiduciary duty to a customer. A registered adviser has a much harder time making that argument, which is precisely the point.
Second, they hedge against the dismissals. Where the 2024 complaints led with fiduciary duty and contract, the newer ones stack theories that have already proven durable.
Smith v. SoFi Securities (N.D. Cal., June 2026) pleads five counts including breach of the implied covenant, negligent misrepresentation, and unjust enrichment.
Weyler v. Commonwealth Equity Services (D. Mass., June 2026) pleads six, adding Massachusetts Chapter 93A and the Kentucky Consumer Protection Act to the common-law claims. These are the counts that survived in LPL, plus state consumer statutes that carry their own fee-shifting.
The rate disparities pleaded in the new cases are as stark as anything in the first wave. Commonwealth is alleged to have paid 0.01 percent against a 5.33 percent market rate.
Betterment is alleged to have paid between zero and 0.25 percent while comparable rates ran to 5.50 percent. Janney is alleged to have paid 0.05 percent. The facts did not get better for defendants. The pleadings simply got more careful.
The defendant list is also moving
The first wave hit wirehouses and the largest independents. The current one reaches further down and sideways:
Regional broker-dealers. Janney Montgomery Scott is a mid-size firm, not a wirehouse.
Independent advisor networks. Commonwealth Equity Services sits at the center of a large independent advisory channel.
Digital platforms and robo-advisers. SoFi and Betterment are not traditional brokerages at all. They are the newest entrants to the defendant list, and because their client relationships are frequently advisory, they may be the most exposed on the count that matters.
With roughly twenty of these cases pending across the federal courts, the population of firms that operate a sweep program and have not yet been sued is shrinking, and the ones left are increasingly those whose client relationships are advisory rather than brokerage.
The instinct in 2024 was that this litigation would live or die on the size of the spread, and that the sheer unfairness of 0.01 percent against five percent would carry it. That is not how it has played out.
The spread gets a case filed; it does not get it past a motion to dismiss. What survives is a duty a court can name, in an account type where the duty is hard to disclaim, tied to language in an agreement the firm wrote.
The plaintiffs who understood that first are the ones still in court, and the firms most exposed now are not necessarily the ones holding the most cash. They are the ones who agreed, somewhere in their client documents, to act as a fiduciary.
The theory that survives is the one worth tracking.
Cash sweep litigation narrowed from an industry-wide grievance into a targeted fiduciary theory in under two years, and the defendant list moved with it.
Rain Intelligence tracks how theories evolve after each ruling and maps them to the firms, account types, and forums most exposed, before the next complaint is filed.
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