WITH RATES RISING, GALVIN INVESTIGATES WHETHER INVESTORS ARE BEING SHORTCHANGED

            Concerned that investors will be facing all of the negative impacts of rising interest rates without seeing any of the positives, Secretary of the Commonwealth William F. Galvin has directed his Securities Division to investigate whether Massachusetts investors are being ill-served by brokers and their in-house and affiliated banks refusing to raise interest rates paid to customers with sweep accounts. 

            The Federal Reserve announced today that interest rates will be raised 0.25% and additional increases are expected later in the year. Galvin believes that with these rate hikes, consumers already struggling to cope with rising costs caused by inflation will also be faced with higher mortgage and credit card rates, while banks keep the interest rates on cash deposits low. 

            “Consumers are being squeezed right now,” Galvin said. “They’re being hit with the double-whammy of higher credit card and loan rates on one end and low rates of interest on their bank accounts and other investments.”

“It’s simply unfair that consumers are being asked to pay more on credit cards and loans, while the banks are pocketing the interest rate hikes that should be earned on custodial money instead of raising interest rates for people who are trying to keep their savings,” Galvin continued. 

            The inquiry being conducted by Galvin’s Securities Division is regarding sweep accounts, which are often used by brokerage firms to hold an investor’s money while it is waiting to be invested. The Division sent letters today to six broker-dealers, inquiring about whether the firms intend to increase the rate of interest on the sweep accounts offered to their customers.

            Letters of inquiry were sent to TD Ameritrade, Merrill Lynch, LPL Financial, Ameriprise, Securities America, and SoFi.