Wall Street Giants in Crosshairs Over Broker Cash Sweep Accounts

Legal scrutiny is mounting for Wall Street powerhouses including JPMorgan Chase & Co. and Wells Fargo & Co. over allegations they shortchanged millions of clients in their handling of idle cash.

Customers have filed proposed class actions against several big banks and their broker affiliates over “cash sweep” accounts in recent weeks, including an Aug. 28 suit targeting Charles Schwab Corp. The Securities and Exchange Commission is also investigating whether Morgan Stanley, among others, broke federal securities laws.

With a sweep program, uninvested cash in a brokerage account is transferred automatically into a higher-interest account. Numerous brokers stand accused ...