Australia’s federal court rules S&P, ABN Amro guilty of misleading investors
In a strongly worded judgment, Justice Jayne Jagot said S&P and ABN Amro had deceived 12 local councils that bought the triple-A rated CPDO, or constant proportion debt obligation, notes created by the bank.
The councils were assured the so-called Rembrandt notes bought from Australian Local Government Financial Services (LGFS) in late 2006 had a less than 1% chance of defaulting. Within six months, they had done just that and the councils lost A$16 million ($16.6 million), or 90% of the funds they had invested.
“S&P’s rating of AAA of the Rembrandt 2006-2 and 2006-3 CPDO notes was misleading and deceptive and involved the publication of information or statements false in material particulars and otherwise involved negligent mispresentations to the class of potential investors in Australia,” Jagot said. “ABN Amro was knowingly concerned in S&P’s contraventions of the various statutory provisions proscribing such a misleading and deceptive conduct,” she added.
“LGFS was also negligent and guilty of misleading and deceptive conduct in failing to fully and accurately disclose all of the material risk to the councils,” Jagot
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