SEC Scrutinizing Wells Fargo’s Cash Sweep Feature for Advisory Clients

Wells Fargo offers three cash sweep options, which allow investment advisory clients to earn a return on uninvested cash balances.

By Niket Nishant

Wells Fargo’s cash sweep options for investment advisory clients are being investigated by the Securities and Exchange Commission (SEC), the bank disclosed in a regulatory filing.

The sweep feature allows such clients to earn a return on uninvested cash balances. The bank offers three sweep options, under which uninvested cash can be deposited into interest-bearing accounts or money market funds.

The note about the investigation was included in Wells Fargo’s 10-Q (quarterly report) filed Oct. 31 with the SEC. The cash sweep options are provided to investment advisory clients when they open an account. No further details about the investigation were included in the filing.

The lender has been working to fix its compliance and repair the damage from an earlier scandal over its sales practices. Its efforts, however, have at times come under renewed criticism following probes into unrelated matters.

One such matter was a hiring policy that required the San Francisco-based bank to interview a “diverse” group of people for some jobs, with half of the candidates being female or nonwhite.

The policy drew scrutiny last year following a report from The New York Times that said the bank had conducted “fake” interviews for jobs that had already been filled.

Also in its Oct. 31 filing, Wells Fargo said the Justice Department had closed its investigation into its hiring practices related to diversity without taking any action.

The issue, however, continues to be under the scanner of the SEC, the bank added.

The lender also remains under an unprecedented asset cap that the Federal Reserve imposed, as well as roughly a dozen consent orders with regulators.

This article was provided by Reuters.

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