Bank of America’s Merrill Lynch agreed to pay $39 million to settle a class action over interest paid on idle cash in retirement brokerage accounts. The preliminary agreement was filed in Manhattan federal court and requires approval from US District Judge Valerie Caproni. Merrill denied wrongdoing.
The case covers Merrill Edge retirement-account holders whose cash was swept into deposit accounts between 15 December 2016 and 15 March 2020. Customers alleged that annual yields of 0.05% to 0.14% were unreasonable when some competing brokerages paid about 2%. The lawsuit alleged that Merrill breached its customer agreements.
SETTLEMENT AWAITS APPROVAL
A September court order recorded that the parties had executed a binding term sheet and cancelled the scheduled final pre-trial conference. The subsequently filed agreement fixed the settlement fund at $39 million, but judicial approval remains outstanding.
In a separate case, another Manhattan federal judge allowed customers to pursue most of a similar proposed class action covering retirement and non-retirement accounts. Bank of America declined to comment on the settlement and had no immediate comment on that decision, Reuters reported.
CASH-SWEEP SCRUTINY CONTINUES
Merrill previously agreed to pay $25 million in January 2025 to settle US Securities and Exchange Commission cash-sweep claims without admitting wrongdoing. Other brokerages have faced similar private litigation as higher market rates widened the difference between sweep yields and available alternatives.
The $39 million agreement would resolve the retirement-account class claims only if the court grants approval. The next concrete milestone is Judge Caproni’s preliminary-approval decision, which would determine whether notice and the claims process can proceed.