Mutual Fund Fees

The New York Law Journal has an article (via in its August 14 edition discussing the dismissal of the federal securities claims in the Salomon Smith Barney mutual fund fees litigation. The plaintiffs had “accused the investment firm of offering undisclosed incentives to brokers and financial advisers, extracting improper fees from investors in its proprietary funds and encouraging its propriety funds to invest in poorly performing companies because of their status as Smith Barney investment banking clients.” In its decision – In re Salomon Smith Barney Mut. Fund Fees Litigation, 2006 WL 2085979 (S.D.N.Y. July 26, 2006) – the court dismissed both the ’34 Act (Rule 10b-5) and ’33 Act (Sections 11 and 12) claims based on the failure to adequately plead loss causation.

Quote of note (opinion): “Here, Plaintiffs have not only not alleged why they lost money on their purchase of the mutual fund stock, they have not alleged even that they in fact lost money on their purchase of the mutual fund stock (i.e., that the mutual fund share price dropped and that it dropped for the precise reason complained of).”

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