NJ Suing Standard & Poor’s
New Jersey filed a lawsuit against Standard & Poor’s. The charge is that the company misled consumers about the independence and objectivity of its ratings services and, for self-serving reasons, used outdated analytic models to maximize market share and profits.
“The independence and objectivity of Standard and Poor’s is of critical importance to New Jersey consumers, who placed their trust in the company’s supposedly objective analysis,” said acting State Attorney General John Hoffman. “Our lawsuit alleges that this trust was misplaced, because Standard & Poor’s was not providing independent investor information, but instead acting in its own business interests, and in the interests of favored clients whose fees provided the company with a significant revenue stream.”
The lawsuit alleges that Standard & Poor’s hurt New Jersey consumers by claiming to be an independent source of analysis on complex investments known as structured finance securities when, in fact, its ratings of those securities were driven by the company’s own revenue goals and favoritism toward investment banking clients who issued the securities and who paid Standard & Poor’s related fees.
The suit charges Standard and Poor’s with three counts of violating the New Jersey Consumer Fraud Act.