Mondaq – On November 12, the liquidators for two Bear Stearns overseas hedge funds filed their complaint against McGraw Hill, Standard & Poor’s, Moody’s, and Fitch (collectively the rating agencies) in an action in New York Supreme Court alleging that fraudulent ratings led to over $1 billion in losses for the funds’ investors.<\/p>\n
According to the complaint, the funds invested in a portfolio of high-grade structured finance products, including CDOs and RMBS, where “at least 90% had the highest rating available,” and therefore depended heavily on ratings in making investment decisions.\u00a0 The complaint alleges that the rating agencies knew that the ratings assigned to the securities in which the funds invested were false.\u00a0 Plaintiffs claim that the rating agencies lacked independence from the issuers of the securities and that their ratings were tainted by a desire to maintain market share in a profitable industry.<\/p>\n