An Australian federal judge has ruled that credit ratings agency Standard & Poor's rating of "AAA" for two complex and risky securities was "misleading and deceptive."

The securities, known as constant proportion debt obligations (CPDOs), were issued in 2006 by the bank ABN Amro. Federal Court Justice Jayne Jagot ruled that Standard & Poor's, which  is owned by McGraw-Hill (NYSE: MHP), and ABN Amro, which is owned by the Royal Bank of Scotland (NYSE: RBS), are liable for some losses incurred by the suing investors, which included several local Australian governments.

The judge said S&P's AAA rating gave the impression that the structured debt securities had an "extremely strong" chance of meeting their financial obligations, and that it was "a representation that S&P had reached this opinion based on reasonable grounds and as the result of an exercise of reasonable care when neither was true and S&P also knew not to be true at the time made."

"We reject any suggestion our opinions were inappropriate and we will appeal the Australian ruling, which relates to a specific rating," S&P said in a statement quoted by news organizations.

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