Commonwealth Financial Network

KTMC brought this case to recover damages for the class and to stop Commonwealth’s unlawful practice whereby Commonwealth fails to provide its customers with interest rates on their swept cash that track prevailing economic and business conditions as promised. Commonwealth is a broker-dealer and investment advisor which offers investment accounts to customers throughout the United States and manages over $300 billion in client assets. As part of its investment services, Commonwealth provides what it calls the Core Account Sweep Programs to its customers whereby Commonwealth sweeps otherwise uninvested cash, such as earned dividends or proceeds from selling stocks, bonds, or other securities, into deposit accounts at FDIC insured banks. In its agreement with its customers regarding the Core Account Sweep Programs, Commonwealth explicitly promised that the interest customers would earn by participating in the Core Account Sweep Programs would “vary based upon prevailing economic and business conditions.” Commonwealth also told its customers that it believed that they would “benefit . . . financially from the rates of return on your cash sweep balances” and told customers that the Core Account Sweep Programs “are designed so that, based on economic circumstances, clients receive interest” on their cash. Contrary to these promises which provided Commonwealth customers with the reasonable expectation that they would receive interest rates on their cash that increased when interest rates rose, Commonwealth actually provides customers with paltry interest rates that do not correlate with prevailing interest rates. Indeed, beginning in April 2022, as interest rates began skyrocketing and the Federal Funds Effective Rate reached a high of 5.33%, Commonwealth provided its customers with meager interest rates as low as 0.03%. Commonwealth provides such drastically low rates to its customers so that it can extract a large part of the difference in the interest actually provided by banks on its customer’s cash for itself—thereby placing its own interest ahead of its customers and using its customer’s cash primarily for its own benefit. To redress this unlawful conduct KTMC has initiated a lawsuit seeking both damages and an injunction, which asserts a breach of contract, breach of implied covenant of good faith and fair dealing, breach of fiduciary duty, and consumer protection claims in the District Court of Massachusetts.