Here at the Am Law Litigation Daily, fat brokerage accounts are about as commonplace as July snowstorms. So forgive us our initial ignorance about the “cash sweep” programs offered by brokers, which were the subject of a class action that Manhattan federal district court Judge Richard Sullivan dismissed Monday. But after reading Sullivan’s opinion, we feel like we could teach a course in cash sweeps.
The programs, Sullivan writes, were introduced back in the late 1970s. Instead of letting extra cash sit in customers’ accounts, the brokerages would periodically place the money in money market accounts. The programs were modified in the 1990s to allow customers an opportunity to put their extra cash in bank accounts affiliated with the brokerages, instead of money market accounts.
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