and Jean-Pierre Douglas-Henry, Matthew Saunders and Richard
F Hans
The Australian Federal Court has this week delivered a landmark
first instance judgment which holds a credit rating agency liable
for the first time (among other things) for the negligent AAA
rating of a structured financial product.
In Bathurst Regional Council v Local Government Financial
Services & Ors (No 5) [2012] FCA 1200, the court held that
13 local councils were entitled to be compensated for their
estimated A$30 million losses arising out of their investment in
Rembrandt notes, comprising constant proportion debt obligations
(CPDOs) arranged by ABN Amro, rated AAA by Standard & Poors
(S&P), and marketed and sold to them by the financial advisory
business, Local Government Financial Services (LGFS). These
defendants were held liable in equal measure on various grounds for
misrepresenting, mis-rating and mis-selling the CPDOs.
