Standard & Poor's found to have given councils bad advice
SEVERAL councils across New South Wales have clawed back millions of dollars in losses after a landmark victory against global rating agency Standard & Poor's.
The world-first ruling - which affects 13 NSW councils - was in relation to the sale of complex financial instruments widely criticised for their role in the global financial crisis.
On Friday, the Federal Court of Australia awarded the councils more than $20.2 million in compensation and legal costs after it found that S&P, ABN Amro Bank and Local Government Financial Services misled the towns about financial products nicknamed Rembrandt notes in the lead-up to the GFC.
The councils had collectively invested $16 million in the products, but when the investments collapsed during the financial crisis they lost more than 90¢ in the dollar.
But Justice Jayne Jagot found S&P's rating of the financial products - a rating of AAA, the highest possible - was misleading and "grotesquely complicated".
The financial product in question was created by ABN Amro.
S&P was also found to have made negligent misrepresentations to the body advising the councils, Local Government Financial Services.
Justice Jagot's original ruling was handed down in November last year, but the individual payments to the councils were made known on Friday.
The list of councils and the payments they will receive include: Bathurst ($932,956), Cooma ($1,866,451), Corowa ($933,225), Deniliquin ($466,612), Eurobodalla ($466,612), Moree ($1,866,451), Murray ($933,225), Narrandera ($1,866,451), Narromine ($466,612), Oberon ($933,225), Orange ($1,399,838), Parkes ($2,799,677), and the City of Ryde ($933,225). These figures do not include the interest they will also receive.
The ruling has paved the way for investors in other jurisdictions to take action against S&P for claims of misleading financial ratings.