The Securities and Exchange Commission will not penalize LPL Financial Holdings Inc., the largest retail brokerage firm with more than 30,000 financial advisors, for its cash sweep program, a hot button issue since the summer of 2024 for the financial advice industry.
LPL Financial is ducking a multi-million dollar bullet.
The SEC in January 2025 penalized two broker-dealers of Wells Fargo Advisors $35 million and Merrill Lynch $25 million for not paying clients appropriate interest on cash held in advisory accounts.
According to the SEC, the difference between the interest paid to customers by the two wirehouses on cash and the yield in other cash sweep programs was almost 4%, or 400 basis points.
But those penalties were before the business-friendly administration of President Donald J. Trump took office. The SEC last year after President Trump was sworn in indicated it was not likely to pursue similar penalties.
Broker-dalers like LPL Financial generate revenue from the cash in clients’ saving or money market accounts, divvying up the interest between customers and the firm. That’s why higher interest rates are favorable to broker-dealers.
Broker-dealers use the term cash sweep for programs that automatically move clients’ cash into money market funds or bank deposit programs. The SEC in August 2024 informed a number of firms, including LPL Financial, that it was reviewing cash management programs for clients’ advisor accounts.
“In July 2024, putative class action lawsuits were filed against LPL Financial in federal district court alleging certain violations of law in connection with its cash sweep programs,” according to the company’s 2025 annual report, which was filed on Monday with the SEC.
The next month, LPL Financial “received a request for information from the SEC regarding certain elements of the company’s cash management program for corporate advisory accounts,” according to the filing.
Last month, “the SEC informed the Company that it had concluded its investigation and did not intend to recommend an enforcement action,” according to filing. LPL Financial said in its annual report that it intended to “defend vigorously” against any potential class action lawsuits.
A spokesperson for LPL Financial on Tuesday morning declined to comment.
LPL Financial this month said it was the latest financial advice company to lay off employees in an era when artificial intelligence software is replacing back office jobs, with the firm cutting about 3% of its 10,100-person workforce.
As usual, financial advisors, who generate revenue, were not laid off.
“Following a firm‑wide review, we identified opportunities to streamline our business across all areas,” an LPL spokesperson wrote in an email earlier this month. “Though difficult, these actions ensure we focus our investments where they have the greatest impact for our business and clients.”
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