UPDATE 2-CIT Group officials lose bid to end fraud lawsuit

* CIT motion to dismiss denied in its entirety

* Misleading statements over lending, disclosures alleged

* CIT filed Chapter 11 bankruptcy in November

* Shares of CIT rise 3.4 percent (Adds plaintiffs' lawyer comments, background, byline)

By Jonathan Stempel

NEW YORK, June 10 (Reuters) - A Manhattan federal judge ordered former CIT Group Inc (CIT.N) Chief Executive Jeffrey Peek and other officers and directors to defend themselves against a class-action securities fraud lawsuit over actions preceding the large commercial lender's 2009 bankruptcy.

The securities fraud lawsuit had been brought on behalf of purchasers of CIT securities from Dec. 12, 2006 to March 5, 2008.

CIT once lent to 1 million small- and mid-sized businesses, but filed one of the five largest bankruptcies in U.S. history on Nov. 1, 2009 after loan losses surged. The New York-based company emerged on Dec. 10 after a prepackaged reorganization.

"We're pleased with the result," said Tor Gronborg, a partner at Robbins Geller Rudman & Dowd LLP in San Diego, representing "hundreds of thousands, if not millions" of former CIT shareholders in the case. He said it is too early to speculate on potential damages.

Douglas Flaum, a lawyer for the defendants, did not immediately return a request for comment.

In her 19-page ruling, U.S. District Judge Barbara Jones said the investors sufficiently alleged they were misled by Peek and other officials, including through CIT's failure to disclose a lowering of credit standards, misrepresenting the performance of subprime mortgage and student loan portfolios, and misstating CIT's financial information.

She also said the plaintiffs' adequately pleaded that directors sometimes approved the lowered lending standards while touting a "conservative" and "disciplined" approach to subprime lending, and learned of the weakened loan portfolios while publicly saying CIT would suffer "minimal" losses.

The lead plaintiff is Pensioenfonds Horeca & Catering, a pension fund for the Dutch hospitality and catering industry, with about 800,000 participants.

CIT was dropped as a defendant after it entered Chapter 11 protection. Spokesman Curt Ritter declined to comment.

The bankruptcy filing caused the government to lose the $2.3 billion in bailout money it had injected into CIT in December 2008.

Peek was replaced as chief executive by John Thain, who previously held the same role at Merrill Lynch & Co and NYSE Euronext (NYX.N) (NYX.PA).

CIT shares closed Thursday up $1.22, or 3.4 percent, at $36.69 on the New York Stock Exchange.

The case is In re: CIT Group Inc Securities Litigation, U.S. District Court, Southern District of New York, No. 08-06613. (Reporting by Jonathan Stempel. Editing by Bernard Orr and Robert MacMillan.)