Justice Stephen Breyer, sitting as a visiting judge, appeared to struggle with Byrne’s argument. He raised a hypothetical scenario about an investor choosing between paying a $42 transfer fee or selecting a higher-cost fund with an expense ratio. Breyer questioned why any investor would opt for the latter, to which Byrne responded that this kind of decision required the testimony of actual investors.
U.S. Circuit Judge Lara Montecalvo pointed out that frequent traders might be more likely to avoid funds with per-transaction fees, but she also expressed skepticism about the likelihood of such behavior. Judge Sandra Lynch echoed her concerns, questioning whether there was a material issue regarding how 100,000 investors would have perceived the missing disclosure.
The SEC, represented by Paul Alvarez, countered that there was no dispute over the material fact that Commonwealth had failed to disclose critical information about its fee structure. The SEC contended that Commonwealth’s conflict of interest—earning more from higher-cost funds—was never disclosed to clients.
