E-Trade class action claims co. underpaid interest in cash sweep program

E-Trade class action lawsuit overview: 

• Who: Thomas M. Simmons filed a class action lawsuit against E-Trade Securities LLC, Morgan Stanley and Morgan Stanley Smith Barney LLC. 
• Why: Simmons claims E-Trade underpaid interest to clients in its cash sweep program.
• Where: The E-Trade cash sweeps class action lawsuit was filed in New Jersey federal court.
• How to get help: Consumers who hold or held cash balances or deposits in an investment account with a cash sweep feature that allegedly did not optimize their returns may be eligible to take part in a class action lawsuit investigation. 

E-Trade underpays interest for brokerage clients in its cash sweep program, a new class action lawsuit alleges. 

Plaintiff Thomas M. Simmons’ class action lawsuit claims E-Trade paid “miniscule” interest rates to its brokerage clients while earning hundreds of millions of dollars on their cash due to rising interest rates. 

“When E-Trade sweeps its clients’ cash through its bank cash sweep program, E-Trade uses that cash to generate returns for itself due to the spread between the interest income that E-Trade earns on the cash and the amount of interest that it pays its clients,” the class action says. 

Simmons wants to represent a nationwide class of consumers who had cash deposits or balances in E-Trade’s cash sweep programs or Morgan Stanley’s bank deposit program since Nov. 21, 2018. 

The complaint also seeks to represent a subclass of consumers who held a retirement account with E-Trade or E-Trade from Morgan Stanley and had cash deposits or balances in E-Trade’s Restricted Stock Service program or Morgan Stanley’s bank deposit program since Feb. 2, 2018. 

E-Trade failed to put clients’ interest ahead of its own, class action claims

The class action argues E-Trade breached its duty to put the interest of its clients ahead of its own when creating and implementing its cash sweep program—a service typically designed to move uninvested cash from a brokerage account into an interest-bearing account. 

“E-Trade is required to act as a fiduciary in the best interests of its clients, including within the scope of its agency relationship with those clients in connection with its cash sweep program,” the E-Trade cash sweeps class action says. 

Simmons claims E-Trade and Morgan Stanley are guilty of unjust enrichment, breach of contract, breach of fiduciary duty and breach of the implied covenant of good faith and fair dealing. 

The plaintiff demands a jury trial and requests injunctive relief and an award of damages for himself and all class members. 

Consumers filed multiple similar class action lawsuits last year over cash sweep programs, including ones against Charles Schwab, UBS Financial, JPMorgan and Ameriprise. 

Do you have cash deposits or balances in an E-Trade cash sweeps program? Let us know in the comments.

The plaintiffs are represented by Paul J. Scarlato, Alan L. Rosca and Jonathan A. Korte of Rosca Scarlato LLC and Salvatore J. Graziano, John Rizio-Hamilton, Avi Josefson and Adam H. Wierzbowski of Bernstein Litowitz Berger & Grossmann LLP. 

The E-Trade class action lawsuit is Simmons, et al. v. E*Trade Securities LLC, et al., Case No. 2:24-cv-11341, in the U.S. District Court for the District of New Jersey.

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