Comments on: Will CDO investors’ deal boost litigation against rating agencies? On the Case Fri, 15 Jul 2016 20:42:45 +0000 hourly 1 By: Ncstatsu Wed, 08 May 2013 01:55:00 +0000 For the record, Cheyne and Rhinebridge are not CDOs, they were structured investment vehicles, a type of operating company. It is unfortunate that the general public will not get a chance to get the facts related to this case. I believe it would have gone a long way to dispelling the woefully uninformed inferences that have permeated throught the political, punditry and general public space. For example, the plaintiffs in this case were not ‘grandma & grandpa”, they are what’s called qualified institutional buyers, the most sophisticated institutional investment management firms in the market (some of which actually issued CDOs as part of their business). These QIBs as they are called are not allowed to outsource their primary duty to a no-cost provider like a rating agency, as such, the QIBs retain absolute authority for investment decisions hence they retain absolute accountability for the results of those decisions. To those that actually work in the capital markets, credit ratings are simply indices, like the S&P 500. It is no more appropriate to sue a rating agency for losing money on a bond that happened to have a AAA rating than it would be to sue S&P for losing money investing in a stock that happened to be in the S&P 500 index. The truly accountable investment firms either settled out quick (Schwab/Yield Olus), went out of business or are barely standing…hence the only deep pockets to go after are the banks and rating agencies. Toss in the fact that the rating agencies were the most transparent entities in the market and now you have low hanging fruit for firms like Robbins Geller. An extra bonus for the DoJ is that S&P does not pose a systemic risk should it be successful in its complaint, as opposed to their decision to not penalize HSBC for its decade of money laundering. Make no mistake, the defendents in these “SIV” cases were far from any true peer assessment of fraud or negligence…but it must be difficult to gamble on a jury pool of non-peers that have been trained for years to place blame on the banks/agencies. The only winners…lawyers.