The U.S. Southern District Court has rejected a class-action lawsuit against Salomon Smith Barney that accused the firm of paying undisclosed fees to financial advisers and brokers to promote its funds and encouraging its proprietary funds to invest in clients of the firm's investment banking division, New York Law Journal reports.
"Plaintiffs have not only not alleged why they lost money on their purchase of mutual fund stock, they have not alleged even that they, in fact, lost money on their purchase of the mutual fund stock," the judge ruled. "Because plaintiffs failed to please loss causation, the federal securities claims must be dismissed."
The attorney for Salomon Smith Barney, James N. Benedict, a partner with Milbank, Tweed, Hadley & McCloy, praised the court's decision, saying, "From an industry standpoint, this was a great decision. [The court] cleared away the underbrush [and] clarified a number of important issues."
However, the plaintiffs' attorney said they intend to repeal.