Japanese Regulator Orders S&P to Improve Ratings

Financial Services Agency cites S&P's ratings on some synthetic CDOs.

Standard & Poor’s Japan unit was ordered by the nation’s financial watchdog to improve its system for verifying and updating credit ratings in the regulator’s first action against a ratings company.

“Significant problems were identified with the company’s business operations from the perspective of the public interest and investor protection,” the Financial Services Agency said in a statement in Tokyo yesterday. The regulator said its investigative arm recommended action against S&P on Dec. 11.

No Trust

“Investors often rely on ratings by agencies like S&P for complicated securities such as CDOs,” Tsuyoshi Ueno, a Tokyo-based senior economist at NLI Research Institute, said by telephone yesterday. “Now what can they trust?”

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