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 of encouraging its proprietary funds to invest in clients of the firm's investment banking division.

"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."

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