A Prospectus Supplement for the Alight Money Market Fund comments, "On September 5, 2024, the Board of Trustees of Alight Series Trust unanimously approved a proposal to liquidate and dissolve the Alight Money Market Fund pursuant to a Plan of Liquidation and Dissolution, whereby the assets of the Fund will be liquidated and the proceeds remaining after payment of or provision for liabilities and obligations of the Fund will be distributed to its shareholders." (Note: For those attending our European Money Fund Symposium, which is Sept. 19-20, welcome to London! We hope you have a great show and an excellent visit!)
It says, "The Fund anticipates that it will complete the liquidation on or around the close of business on or about October 16, 2024. Until the Liquidation Date, the Fund will continue to accept purchases into the Fund. Reinvestment of dividends on existing shares in accounts also will continue until the Liquidation Date. On the Liquidation Date, the Fund will make liquidating distributions to each remaining shareholder, equal to the shareholder's proportionate interest in the net assets of the Fund, in complete redemption and cancellation of the Fund's shares held by the shareholder. As soon as practicable thereafter, the Fund will be terminated and dissolved."
They state, "For tax purposes, with respect to shares held in a taxable account, the automatic redemption of shares of the Fund on the Liquidation Date will generally be treated as any other redemption of shares (i.e., as a sale that may result in gain or loss for federal income tax purposes). Instead of waiting until the Liquidation Date, a shareholder may voluntarily redeem his or her shares before the Liquidation Date to the extent that the shareholder wishes to realize any such gains or losses before the Liquidation Date. If you own Fund shares in a tax deferred account, such as an individual retirement account or 401(k) account, you should consult your tax adviser to discuss the Fund's liquidation and determine the tax consequences."
In other news, Bloomberg Law writes "Wall Street Giants in Crosshairs Over Broker Cash Sweep Accounts." They tell us, "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."
They explain, "With a sweep program, uninvested cash in a brokerage account is transferred automatically into a higher-interest account. Numerous brokers stand accused of violating duties to act in the best interest of clients by funneling money to affiliated banks and negotiating one-sided deals that paid customers paltry interest rates."
Bloomberg says, "Robert Jackson, a New York University law professor and former Democratic SEC commissioner during the Trump administration, called it a 'trillion-dollar conflict of interest' that has affected retail investors around the country. The cases raise legal questions for courts and regulators, however, including what interest rate customers are entitled to."
He comments, "The economics are common sense but the law is actually more complicated than it ought to be." The piece states, "Charles Schwab previously called the suit against it a 'legally unsound, copycat lawsuit.' Wells Fargo, JPMorgan, and Morgan Stanley declined to comment for this story."
The article continues, "Brokerage firms and affiliate banks make 'net interest income' on the difference between the interest paid to customers and the interest the banks earn when loaning the sweep deposits, according to customer lawsuits. That spread, the customers say, has became more pronounced as the federal funds rate -- the rate at which banks lend funds to each other -- has risen. As of Aug. 30, that effective rate was 5.33%, up from 2022 when it was as low as .08%. Customers say they haven’t gotten the benefit of those increases, as the interest rate that firms like Wells Fargo paid to some brokerage customers remained as low as .05%."
The piece adds, "Several lawsuits allege the brokers violated their fiduciary duty to customers by steering funds to a related entity. Fiduciary duties are also an area of focus for the SEC in its investigations, lawyers said. Many of the lawsuits also accuse brokers of breaching contracts that promised clients a reasonable rate of interest. That raises the question of what a reasonable rate should be, lawyers said. 'That's the fundamental question that regulators are going to have to answer and so will lawyers in front of the courts as we're trying to get this money back for investors,' Jackson said."
Finally, they write, "Some banks, including Charles Schwab, Citigroup Inc., and Wachovia Corp. -- now part of Wells Fargo -- previously faced allegations they misled customers over their cash sweep programs. A New York federal judge dismissed the suit in 2009 after finding, in part, customers hadn't adequately alleged a breach of fiduciary duty. About a decade later, the SEC approved a rule, Regulation Best Interest, requiring brokers to act in the 'best interest' of their clients. The rule has been cited by customers suing the banks, though it's unclear how it might influence courts."
