An Australian federal judge has ruled that credit ratings agency Standard & Poor's rating of "AAA" for two complex and risky securities was "misleading and deceptive."

The securities, known as constant proportion debt obligations (CPDOs), were issued in 2006 by the bank ABN Amro. Federal Court Justice Jayne Jagot ruled that Standard & Poor's, which  is owned by McGraw-Hill (NYS: MHP) , and ABN Amro, which is owned by the Royal Bank of Scotland (NYS: RBS) , are liable for some losses incurred by the suing investors, which included several local Australian governments.

The judge said S&P's AAA rating gave the impression that the structured debt securities had an "extremely strong" chance of meeting their financial obligations, and that it was "a representation that S&P had reached this opinion based on reasonable grounds and as the result of an exercise of reasonable care when neither was true and S&P also knew not to be true at the time made."


"We reject any suggestion our opinions were inappropriate and we will appeal the Australian ruling, which relates to a specific rating," S&P said in a statement quoted by news organizations.

The article Australian Court Slams S&P Rating as "Deceptive" originally appeared on Fool.com.

Fool contributor Dan Radovsky has no positions in the stocks mentioned above. The Motley Fool owns shares of The McGraw-Hill Companies. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.


Increase your money and finance knowledge from home

Investing in Startups

The lucrative and risky world of startups.

View Course »

Investing Like Warren Buffett

Learn from one of the world's best investors.

View Course »

Add a Comment

*0 / 3000 Character Maximum