Sunday, August 19, 2012

Moody’s, S&P Must Face Fraud Claims In Subprime Investor Suit

Moody’s, S&P Must Face Fraud Claims In Subprime Investor Suit

Moody’s Corp. (MCO) and Standard & Poor’s lost a bid for dismissal of fraud claims in a suit by investors claiming the companies falsely assigned inflated ratings to notes sold by Morgan Stanley (MS) that were backed by subprime mortgages.
U.S. District Judge Shira Scheindlin yesterday declined a request to throw out fraud claims against the two rating companies and a claim of aiding and abetting fraud against Morgan Stanley. Scheindlin narrowed the suit, dismissing claims by three of the 15 plaintiffs.
Scheindlin also dismissed the investors’ fraud claims against the bank and aiding-and-abetting claims against the rating companies, ruling that it was the rating companies, not Morgan Stanley, that issued the ratings.

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