An Australian court has ruled that Standard & Poor’s misled investors in the way that it rated some investments.
The agency gave its highest triple-A rating to investments known as derivatives that lost almost all their value in the run-up to the 2008 global economic crisis.
In a strongly worded judgement, the court said S&P and ABN Amro, the bank that issued the complex financial products, had deceived 12 Australian local councils that bought them, and it awarded damages.
This was the first time a ratings agency had faced trial over its opinions.
The ruling, which S&P plans to appeal against, could set a precedent for future litigation around the world.
“This is a major blow to the ratings agencies, which for years have had the benefit of profiting from the assignment of these ratings without ever being accountable to investors for those opinions,” said lawyer Amanda Banton of Piper Alderman, who represented the local councils.
“Today’s judgement will ultimately have the effect of ensuring ratings agencies are accountable and promoting transparency in the ratings process,” Banton added.
“We are disappointed with the court’s decision, we reject any suggestion our opinions were inappropriate,” the ratings agency said in an emailed statement.
Amsterdam-based ABN Amro, which was one of a number of Dutch banks that were nationalised as part of a government bail-out in the 2008 crisis, now faces legal action.