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.

The rating company's woes in Japan came to light less than a month after it was found liable by an Australian judge for issuing misleading ratings on securities bought by municipalities ahead of the global financial crisis. S&P failed to properly confirm information that would affect the ratings of synthetic collateralized debt obligations, the FSA said.

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