Avantax Investment Services, Inc. Securities Lawsuit Investigation

Shamis & Gentile P.A., one of the nation's premier class action law firms, is investigating potential claims against Avantax Investment Services, Inc. involving its cash sweep program.

If you had uninvested cash swept into the company's cash sweep program, you may be eligible for compensation through a potential class action.

Company Background

Avantax Investment Services, Inc. is part of a distinct community within Cetera Wealth Services LLC, a broker-dealer that is a member of FINRA and SIPC. Avantax operates from 3200 Olympus Blvd., Suite 100, Dallas, Texas, 75019, and maintains a national footprint through a network of financial professionals who offer investment and wealth management services.

Through this platform, Avantax provides brokerage and advisory accounts in which customers may hold securities as well as “idle” or uninvested cash. Like many firms in the industry, Avantax uses a bank sweep program to handle that uninvested cash, automatically moving it into designated deposit accounts rather than leaving it in a non–interest-bearing position.

Cash Sweep Program or Potential Issue

According to Avantax’s Bank Sweep Program disclosure, uninvested cash in eligible brokerage accounts is automatically swept into interest-bearing deposit accounts at one or more program banks. These are typically demand deposit accounts that offer daily liquidity and are intended to serve as the “core” cash option for the account.

Key mechanics described in the Avantax disclosure include:

• Automatic sweeps of idle cash: Cash balances not otherwise invested are swept, generally on a daily basis, into program bank deposit accounts
• FDIC insurance: Deposits at participating program banks are eligible for FDIC insurance up to applicable limits
• Liquidity and access: Swept cash is intended to be readily available to settle trades, pay fees or meet withdrawal requests
• Interest paid to customers: The program banks pay interest on these sweep deposits, which is then credited to customer accounts at rates set under the program

The disclosure also explains that Avantax and its affiliates receive compensation and other financial benefits from the program banks in connection with these sweep deposits. In industry practice, this often takes the form of “spread” revenue, where the bank earns a higher rate on the funds it invests or loans out than the rate it pays on sweep balances. The difference between those rates is net interest income that benefits the institution.

Potential consumer claims

Depending on the facts and account documents, potential legal theories being evaluated include:

• Breach of contract – if Avantax’s actual sweep practices or rates did not align with the terms and expectations set out in customer agreements or disclosures
• Breach of fiduciary duty – for certain advisory or discretionary accounts, if Avantax failed to act in the best interests of clients when selecting or maintaining low-yield sweep options
• Unjust enrichment – if Avantax or its affiliates retained spread revenue or other economic benefits derived from customer cash without fairly compensating those customers
• Inadequate or misleading disclosures – if customers were not clearly told how the program worked, what Avantax earned from it or what reasonably comparable alternatives existed

These theories are being evaluated in light of Avantax’s specific sweep disclosures and the broader pattern of cash sweep litigation against other institutions.

You May Be Entitled to Compensation

If Avantax’s cash sweep program paid unfairly low interest or generated undisclosed profits from customer cash, affected investors may be entitled to financial compensation through a potential class action. Eligibility will depend on the specific account, time period and sweep activity.

To find out if you may qualify, please complete the existing form on this page so the team can review your information and contact you about your potential claim.