Fitch Becomes Latest Rating Agency Investigated By Italian Police For Market Manipulation

By: EW News Desk Team   Date: 25 January 2012

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EW News Desk Team

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EconomyWatch, News Desk Team

 

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25 January 2012

Italy’s financial police raided and seized documents from Fitch Ratings’ offices in Milan on Tuesday reported Reuters, as authorities continue to pursue investigations into credit rating agencies’ role for alleged market manipulation and abuse of privileged information.

According to the report, the raid came less than a week after a similar operation was conducted at the offices of Standard & Poor’s. Rival rating agency Moody’s was also placed under investigation last year, with Italian prosecutors alleging that reports by S&P’s and Moody's on Italy and its banking system provoked sharp losses on the Milan stock market.

"Men from the financial police are at Fitch in Milan," said Carlo Maria Capristo, a chief prosecutor from the southern Italian town of Trani, to Reuters.

Trani prosecutor Michele Ruggiero, who is leading the investigation and was in Milan for the police operation, declined however to comment on the nature of the documents that were seized.

Last week’s search order on S&P's offices though may give some indication of the type of investigation being done.

A copy of the search order, which was seen by Reuters journalists, accused S&P's downgrade of Italy's sovereign rating on January 13 on being based on "untruthful, tendentious, incoherent and unfair" assessments and data.

It also claimed that news of the imminent downgrade was leaked when markets were still open, adding the agencies' actions and reports on Italy caused "real damage to the financial market, with a slump in the share price of banks and/or of public debt."

S&P’s have unsurprisingly rejected the allegations.

"S&P did not divulge any of its own ratings decisions on the sovereign debt of European countries before the official release of January 13," it said, adding that none of the agency's controlling shareholders had had access to its data or reports before they were released in the public domain.

Related: Appetite For Self-Destruction: Have Rating Agencies Lost The Plot?

Related: EU Considering Ban On Credit Ratings For Crisis Nations

Related: The Italians Have Been Downgraded

Fitch representatives, who confirmed to the Wall Street Journal that Italian police had visited their offices, added that their company were not guilty of the allegations, and expressed confidence that their names would be cleared.

"As ever, we will cooperate with any official investigation and we are entirely confident that our analysts have operated with the highest standards of professionalism and integrity," said the rating agency. "We are also confident that the Italian authorities will reach the same conclusion following their investigation."


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