Over a couple of weeks earlier this year, a federal judge dismissed a high-profile cash sweep lawsuit against U. S. Bancorp with prejudice, and another judge partially knocked back claims against Osaic. Raymond James later seized on those rulings to argue that its own cash-sweeping case should be thrown out.

Together, the decisions suggest that courts may be increasingly skeptical of investor arguments that low sweep rates alone amount to fiduciary breaches— especially where the disclosures were explicit and the contracts left rate-setting discretion to the firms. Most brokerages offered customers higher-yielding money market alternatives, but the sweep account was the default option.

The most decisive ruling came January 30, when U. S. District Judge Eric Tostrud in Minnesota dismissed in full a proposed class action suit accusing U. S. Bancorp and its broker-dealer subsidiary of paying“ unreasonably low” interest on swept cash while retaining the spread, or the difference between what the asset manager earns on the cash balances and what it pays its customers in the account.

These lawsuits, many of them filed in 2024 and 2025, came after a period of rising interest rates, when broker-dealers suddenly enjoyed an opportunity to capitalize on the rate differential. For much of the previous decade between 2010 and 2021, short-term interest rates were near zero. As interest rates surged beginning in 2022, firms generated billions in net interest income from client cash, prompting plaintiffs to accuse them of operating sweep programs as hidden profit centers.

The dismissal of the Bancorp case, which bars the plaintiffs from refiling, cut across every major legal theory advanced in recent sweep cases.

“ The primary dismissal-prompting problem is that [ the defendants ] fully disclosed the program’ s interest-payment arrangement and did not commit to paying a‘ reasonable’ or minimum interest rate,” Tostrud wrote, adding that the plaintiffs failed to plausibly allege either a fiduciary duty or a breach of contract. The court rejected claims for breach of fiduciary duty, negligence, misrepresentation, statutory consumer fraud and unjust enrichment, concluding that the sweep program was governed by enforceable contracts that clearly warned customers the rates could lag alternatives and that the firm benefited financially from the program.

On February 5, Raymond James tried again to dismiss its own cash sweep litigation in Florida, urging the court to follow the U. S. Bancorp decision. In its filing, the firm highlighted Tostrud’ s conclusion that“ the agency relationship between plaintiffs and [ U. S. Bancorp ] did not extend to the establishment of interest rates in the cash-sweep program,” and that even if a fiduciary duty existed, the disclosures defeated any claim of breach.

Raymond James’ s filing underscores how aggressively broker-dealers are now pushing back after a wave of lawsuits and regulator attention engulfed the industry in 2024 and 2025.

LPL, Wells Fargo, Ameriprise, Morgan Stanley, UBS, Charles Schwab and Raymond James all found themselves in the litigation crosshairs, alongside parallel regulatory scrutiny from the Securities and Exchange Commission and the Financial Industry Regulatory Authority.

But recent court decisions suggest judges may be drawing sharper lines between regulatory compliance failures and private civil liability.

That tension was on display in Arizona, where U. S. District Judge Krissa Lanham last month only partially dismissed claims against Osaic brought by investors who alleged the firm pocketed interest that should have flowed to customers. Lanham ruled that, for certain accounts, the relationship between Osaic subsidiaries and clients“ did not rise to the level of a fiduciary duty to care.” She didn’ t remove all the claims, however.

The mixed outcome highlights the industry’ s evolving legal landscape. Regulators have already extracted penalties and restitution tied to sweep disclosures, including a recent Finra order requiring Osaic to repay $ 4.6 million related to inaccurate sweep representations by a subsidiary. And in 2022, the SEC ordered Schwab to pay $ 187 million for the cash sweep program related to its robo-advisor; in 2025, it also ordered Wells Fargo and Merrill Lynch to pay $ 60 million in penalties for putting customers in cash sweep programs with low interest rates.

— Jennifer Lea Reed

MARCH / APRIL 2026 | FINANCIAL ADVISOR MAGAZINE | 9