Deposit Sweep Program

A deposit sweep program is an arrangement under which uninvested cash in a brokerage, investment advisory or fintech account is moved automatically into interest-bearing deposit accounts at one or more banks. The customer sees a single cash balance on the broker's or app's platform, while behind the scenes the money sits at partner banks, often split among several of them so that more of it falls within deposit insurance limits.

Sweep programs are run by broker-dealers, robo-advisers, wealth managers and fintech companies, usually with a technology firm that allocates balances across a network of banks. They differ from the corporate sweep accounts that banks offer businesses, which move money between a company's own accounts, and from the contract that sets up such movements, described under account sweeping agreement.

Imagine you leave cash in your investment account between trades. Instead of letting it sit idle in the broker's drawer, the broker places it in savings accounts at a group of banks, perhaps putting no more than the insurance limit in each. You do not have to open those accounts yourself, and you can use the cash the moment you want to buy an investment.

It is a convenient service, but the details matter: how much interest you get, which banks hold your money, and how much of it is really insured depend on the program's terms.

1. Cash arrives. A customer deposits money or sells an investment, creating an uninvested cash balance.
2. Daily sweep. At the end of the day, the program sweeps the balance into deposit accounts at program banks, usually held in the name of the broker or a custodian "for the benefit of" its customers, a form of FBO account.
3. Allocation. The program's records track each customer's share at each bank, filling banks in a set order up to a target amount.
4. Withdrawal. When the customer needs cash, the program pulls funds back from the banks, typically the same or next day.

Some programs sweep cash into a money market fund instead of bank deposits, which changes the protection: fund shares are securities, not deposits.

Because the accounts are held in the broker's name for customers, FDIC coverage depends on pass-through deposit insurance rules: the bank's records must show the custodial relationship, and the broker's records must identify each customer and their share. If those conditions are met, each customer is insured up to the standard limit at each program bank, so a program using many banks can offer coverage well beyond 250,000 dollars per customer, as of November 2026. Customers' own deposits at a program bank outside the sweep count towards the same limit. Cash held at the broker before it is swept is protected differently, by the Securities Investor Protection Corporation if the broker fails, and SIPC protection does not cover bank deposits once swept.

Sweep programs are a significant source of revenue for many brokers. The banks pay the program a rate on the deposits, the broker passes part of it to customers and keeps the rest, and brokers that own banks can use the swept cash as cheap funding. When interest rates rose in 2022 and 2023, the gap between sweep rates and market rates widened, and in 2024 several large US brokerage firms faced lawsuits and regulatory inquiries over the rates paid on sweep balances, after which some raised rates for advisory clients. Customers can often choose another cash option, such as a money market fund or a direct holding of treasury bills, but many never change the default. Critics argue that this makes the sweep a passive choice that benefits the firm; supporters reply that the programs provide convenience and broad insurance coverage.

Sweep programs sit across several regulatory regimes. The Securities and Exchange Commission and FINRA oversee broker disclosures, and investment advisers owe fiduciary duties when choosing cash options for clients. On the bank side, deposits placed through third parties may count as brokered deposits under FDIC rules, which limit their use by weaker banks. Reciprocal deposits, exchanged between banks through networks so that each customer stays insured, are treated more favourably: since 2018 US law has excluded them from the brokered category up to the lesser of 5 billion dollars or 20 per cent of a bank's liabilities. The 2024 collapse of fintech middleware provider Synapse, which left some end users unable to reach funds held through partner banks, increased scrutiny of how such programs keep records.

• Federal Deposit Insurance Corporation
• Securities Investor Protection Corporation