Osaic has been hit with a class action suit claiming the firm put its own profits ahead of customers in how it has handled its various cash sweep programs.

In the suit filed in Arizona federal court, Osaic customers Robin Nackman and Douglas Whittaker accused Osaic of a “dramatic underpayment of interest” to their customers, violating their “contractual, implied and/or fiduciary obligations” to the plaintiffs.

“Despite its representation to the contrary, Osaic categorically has not adjusted interest rates paid to customers based on economic or prevailing market factors, but rather has kept the sweep rates artificially depressed as to reap substantial profits for itself,” the complaint read.

In the complaint, Nackman and Whittaker argue that typically, uninvested cash from customer accounts is moved (or “swept”) into interest-bearing accounts, generating client returns.

In Osaic’s case, customers with brokerage, advisory and IRA accounts can all access sweep accounts via sweep programs for accounts introduced to their clearing firms, Pershing and National Financial Services, which are responsible for establishing deposit accounts at each program’s bank, depositing, withdrawing and transferring cash to, from and within the accounts.

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Nackman and Whittaker alleged that Osaic kept the interest rates for their cash sweep accounts “artificially low,” while earning higher interest rates on the deposits from so-called “fees” paid by the participating banks.

Firms in the industry have continued to face similar class action suits, including Osaic itself; a customer filed a similar suit in early 2025, which is still ongoing, though several of the initial complaints have been dismissed.

In the past several months, plaintiffs have filed class actions against firms such as Betterment and Commonwealth, alleging claims similar to those detailed in the Osaic suit; though the rate of class action complaints against firms seems to have declined somewhat since 2025.

Regulators at the Securities and Exchange Commission also launched their own investigations into large brokerages, including Merrill Lynch, Wells Fargo and Morgan Stanley (the commission settled charges against the first two firms in January 2025 and closed its inquiry into Morgan Stanley without enforcement action the following May).

The agency also dropped a similar inquiry into LPL Financial earlier this year.

In the latest case, according to the plaintiffs, the banks benefited from the “significant” cash Osaic offered through the sweep programs, which the banks used for investment or lending purposes. The fees paid by the banks reduced the interest paid on customers’ cash balances in the sweep accounts.

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“Osaic has thus established a practice whereby Osaic makes significant profits on its client cash balances whereas the client, to whom a fiduciary duty or duty to act in the client’s best interest is owed, loses money on his or her cash balances compared to other instruments of comparable risk, because the interest the client earrings in his cash sweep account is less than the fees Osaic collects,” the complaint read.

The plaintiffs also alleged that the interest rates among Osaic competitors (including Vanguard, Fidelity and Baird) were “significantly higher” than Osaic’s rates for similar sweep programs. Even when the Federal Reserve raised interest rates over the past several years, the plaintiffs claim Osaic kept its rates steady.

In the suit, the two plaintiffs are asking the court to declare it a “proper class action” and want the defendants to pay “actual damages” (including punitive damages) and other profits.

In a statement, an Osaic spokesperson said that “we deny the allegations and will be defending this matter vigorously. We do not comment further at this time as the matter is pending.”

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