NEW YORK (9/4/09)—In a rating agency case that may have broad implications, a U.S. District Court judge here rejected arguments by Moody's Investor Services Inc. and Standard & Poor's (S&P) that investors can't sue over deceptive ratings of private-placement notes because those ratings are protected by the First Amendment right of free speech.
In her decision, U.S. District Judge Shira Scheindlin declined to dismiss fraud charges brought by two investors, Abu Dhabi Commercial Bank and Kings County, Washington, against Moody's, S&P, and Morgan Stanley & Co. The ruling will force the three companies to respond to fraud charges in the class action suit that claims certain risks associated with securities backed by subprime mortgages were not exposed for investors.
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Courtesy of cuna.org