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District Files Consumer Protection and Securities Law Claims against Standard and Poors

Tuesday, February 5, 2013

District Files Consumer Protection and Securities Law Claims against Standard and Poors

The District’s lawsuit seeks injunctive relief, civil penalties, restitution, and disgorgement of unlawfully obtained revenues.

WASHINGTON, DC – District of Columbia Attorney General Irvin B. Nathan announced that the District of Columbia is filing a civil enforcement action today against Standard and Poor’s, in coordination with similar federal and state enforcement actions being filed the same day.

In its DC Superior Court complaint, the District alleges that, contrary to S&P’s repeated public statements that its analyses of structured finance securities were objective and independent, S&P allowed its desire for increased revenue from issuers of securities to influence the process by which it assigned ratings to securities after 2001.

Structured finance securities backed by subprime mortgages were at the center of the financial crisis in 2008. S&P has been the leading credit rating agency for these securities, which include residential mortgage-backed securities (RMBS) and collateralized debt obligations (CDOs).

According to the District’s complaint, S&P’s misrepresentations misled and harmed DC consumers, including those who purchased securities through mutual funds, in violation of the District’s consumer protection law. The District also alleges that S&P violated the District’s securities laws by making untrue statements in connection with sales of securities.  

The District’s lawsuit seeks injunctive relief, civil penalties, restitution, and disgorgement of unlawfully obtained revenues.

“Investors are entitled to rely on a rating agency’s representations about how it rates securities,” Attorney General Nathan said. “Together with our federal and state partners, we intend to hold S&P accountable for any significant departure from its professed standards of independence and objectivity.”

Media Contacts

  • Ted Gest (OAG) (202) 727-6283
  • Michael Flagg (DISB) (202) 442-7756