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The Governance of Credit Rating Agencies

Regulatory Regimes and Liability Issues

Andrea Miglionico

The global crisis revealed that credit rating agencies (CRAs) are capable of bringing about potential distortions in the financial sector, thereby resulting in a reduction in market confidence which, in turn, influences negotiations and expectations. CRAs need to be held accountable for lack of transparency and inaccurate ratings, however the existing regulatory framework does not secure adequate investor protection. This book provides a new and important contribution to research in the area, at a crucial time in the debate around financial regulation and investment regimes.
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Chapter 10: AUSTRALIA

Andrea Miglionico


Chapter 10 provides critical reflections of Australian case law, namely the Bathurst judgment. This landmark case shows that a duty of care was held to be owed to investors by the credit rating agency in the absence of privity of contract: a CRA has been found to owe and have breached a duty to investors with whom it had no direct relationship. On this view, the duty to exercise reasonable care and avoid negligent misstatements in developing a rating is imposed on expert professionals. The Bathurst case demonstrated that the Australian courts regard credit ratings as expert statements of fact and established that a CRA plays a public role: this implies that it is not sufficient for a CRA to publish disclaimers stating that credit ratings are simple expressions of opinions. The Bathurst judgment may be attractive for courts because of the re-characterization of ratings as factual representations rather than opinions, which would make it much easier to impose liability on credit rating agencies for negligent misrepresentation.

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