Australian court hears arguments in S&P CPDO case, reports newspaper

The Sydney Morning Herald reports on a law suit where credit-linked note investors are suing rating agency Standard & Poor’s – see original article. The case is unusual, since in most countries including the US, the rating agencies are regarded as being protected from legal action over their ratings by free speech laws. However, under Australian law, S&P needs to prove that its ratings were reasonable, according to legal sources in the country, rather than relying on the defence that they are merely opinions.

The class action lawsuit is brought by 12 councils (local governments) in New South Wales, who lost most of their capital on CPDOs structured by ABN Amro under its Rembrandt series and which were rated AAA by S&P, according to the article.