On Monday, the Second Circuit reversed dismissal of a securities fraud case against Smith Barney/Citigroup for misleading mutual fund investors about the true cost of "transfer agent" services, for which the mutual funds paid an outside vendor.  After a few years, the transfer agent, at SmithBarneyCitigroup's request, started rebating most of the fees to SmithBarney/Citigroup.  SmithBarney/Citigroup nonetheless charged 100 percent of the fees to the mutual funds. 

The Second Circuit rejected arguments that the information wasn't "material" and that SmithBarney/Citigroup's conduct didn't cause any actual losses.  Operating Local 649 Annuity Trust Fund v. Smith Barney Fund Mgmt. LLC, No. 07-5125 (2d Cir. Feb. 16, 2010).