Why the SEC Dropped Its Cash Sweep Investigation into LPL

Nothing to sweep here.

The Securities and Exchange Commission dropped its cash sweep investigation into LPL Financial, the latest sign of shifting priorities for the agency after it dismissed a similar case against Morgan Stanley in May. Under Chairman Paul Atkins, the agency is grappling with investigations begun under the Biden administration while pushing for a more business-friendly, deregulatory environment. The results could mean fewer avenues for clients to find out what’s really happening to their money, said Bill Singer, a veteran Wall Street regulatory lawyer.

“When the average client reads about this case, they’re going to be shocked that a financial institution took money that was not theirs,” Singer said. “And not only did they think it was OK, but they got away with it.”

LPL didn’t respond to a request for comment.

IPOs and Crypto

The investigation began in August 2024 and was designed to look into LPL’s use of cash sweeps, the practice of shifting client cash from advisory accounts to affiliate banks’ accounts, or money market funds, and earning interest. The strategy, however, can sometimes be a breach of fiduciary duty. Under former SEC Chairman Gary Gensler, the agency fined Merrill Lynch and Wells Fargo a combined $60 million for the practice. His administration, however, has been accused by various industry leaders of regulating by enforcement, which Singer said is now a thing of the past. “It’s not really difficult to figure out what’s going on here. It comes down to one word, and it’s politics,” Singer said. “It’s very clear that the politics of regulation in the Trump-Atkins regime is: ‘We’re not going to be bringing creative enforcement actions … We’re here (as Atkins recently said) to make IPOs more common, and to help crypto.’”

The agency has certainly made significant changes to its enforcement agenda:

• Since Atkins was appointed, SEC enforcement actions are at their lowest level in more than a decade.
• Nearly 20% of the agency’s staff at the end of the Biden era had left by September 2025, with over 12% opting to take a buyout.

Cleanup on Aisle PR. The SEC’s leanings tend to go along with the political winds of the time: pro-investor during Democratic regimes, and pro-business during Republican ones. Singer said the back-and-forth may end up confusing investors. “Customers believe that, if I go to a larger firm, household names like Merrill Lynch, Wells Fargo, Goldman Sachs and JP Morgan, somehow these larger firms are more ethical and they’re going to protect me,” Singer said. “And then something like this comes out, and not only doesn’t the firm settle with the SEC, but the SEC drops the case. I just don’t think this is going to be a great public relations development in the industry.”