(Reuters) - A judge for the Securities and Exchange Commission has dismissed a case against two former State Street Corp executives accused of misleading investors about the amount of exposure a $2.9 billion fund had to risky subprime mortgage-related investments.

Chief Administrative Law Judge Brenda Murray ordered that the proceedings against John P. Flannery and James D. Hopkins be dismissed, according to an October 28 initial decision.

Flannery was a chief investment officer of the Americas for State Street Global Advisors until November 2007. SSgA is the investment management arm for Boston-based State Street.

The case centered on disclosures around SSgA's Limited Duration Bond Fund. The investment vehicle was managed as an "enhanced cash" fund that was designed to beat short-term interest rate benchmarks. The fund had $2.9 billion in assets in mid-2007.

Flannery and Hopkins, a former head of product engineering for SSgA North America, were accused of misleading investors about the extent of subprime mortgage-related investments in the fund. Investors included Emory Investment Management, General Motors Co, Xerox Corp, the Monetary Authority of Macao and the Houston Police Officers Pension System, case documents show.

An attorney for Flannery declared "total victory" in the case.

"This case never should have been brought against our client," attorney Mark Pearlstein said in a statement.

David Bergers, director of the SEC's Boston Regional Office, said, "We are reviewing the decision."

State Street shares were down 2.7 percent at $40.87 on Monday morning on the New York Stock Exchange.

(Reporting by Tim McLaughlin in Boston, editing by Gerald E. McCormick and Matthew Lewis)

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