Multiple class actions have been commenced in the Australian Federal Court in relation to losses suffered by investors in synthetic collateralised debt obligations and other financial products, some of which were distributed or sold by Lehman Brothers Australia Ltd (in liquidation) and by certain major Australian banks, and were assigned credit ratings by Standard and Poor’s.
The products were variously rated ‘AAA’, ‘AA or ‘AA-‘ by Standard and Poor’s and the Applicants allege that Standard and Poor’s were negligent and engaged in misleading and deceptive conduct by assigning those ratings to those financial products. Standard and Poor’s deny the allegations.
In the latest class action, the Federal Court has ordered Standard and Poor’s, by its Chief Executive Officer, to identify by affidavit the real issues relating to the ratings methodology used in rating various financial products.
Amanda Banton and Lisa Gallate have written an article about the cases which first appeared in Corporate Rescue and Insolvency October 2016 edition.
Reviewing the Ratings