Investors who wished for a helping hand in pursuing claims against banks that sold them exotic debt instruments instead got a kick in the pants from the Second Circuit today.
No no-admit deals
In 2011, U.S. District Judge Jed Rakoff famously refused to approve a consent decree between the Securities and Exchange Commission and Citigroup. The pact
Have you heard people — okay, lawyers — talk about "the Southern District"? As if you MUST know what they mean? Surely not the Southern District of West Virginia — one of the coolest names in the entire U.S. court system.
No. Not that. This:
S.
D.
N.
Y.
Where Learned Hand sat before Calvin
You may remember that in February 2008 the "auctions" that gave "auction-rate securities" their liquidity seized up. Lots of people who'd bought ARSs thought they could sell them about as easily as they could unload shares in money market funds. The slightly higher rate of return made the ARSs more attractive. So they believed.
The auctions
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