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A federal judge has said credit ratings are not always protected opinion under the First Amendment, a defeat for credit rating agencies in a lawsuit brought by investors who lost money on mortgage-backed securities.

The November 12 decision was a little-noticed setback for McGraw-Hill Cos’ Standard & Poor’s, Moody’s Corp’s Moody’s Investors Service and Fimalac SA’s Fitch Ratings, which have long invoked First Amendment free speech protection to defend against lawsuits over their ratings.

These agencies had argued that the Constitution protected them from claims they issued inflated ratings on more than $5 billion of securities issued in 2006 and 2007, and backed by loans from former Thornburg Mortgage Inc and other lenders.

But the judge said the ratings were shared with too small a group of investors to deserve the broad protection sought.

“The court rejects the rating agency defendants’ arguments that the First Amendment provides any protection to them under the facts of this case,” U.S. District Judge James Browning in Albuquerque, New Mexico, wrote in a 273-page opinion.

Browning nonetheless dismissed claims accusing Moody’s and Fitch, but not S&P, of misrepresentations, saying the investors did not adequately allege that the two agencies did not believe their ratings, or knowingly concealed their inaccuracy.

He also said federal law preempts some arguments that the investors used to recover under New Mexico securities law.

The judge said the investors may file an amended complaint, which had sought class-action status. If the state law claims went forward, it could provide an avenue for investors to go after the agencies in other states.

Browning had denied the agencies’ motion to dismiss the complaint on September 30, without giving reasons.

S&P, in a statement, called the First Amendment ruling “inconsistent” with other court rulings. Fitch spokesman Daniel Noonan said that agency is pleased that claims against it were dismissed. Moody’s and lawyers for the investors declined to comment or had no immediate comment.

Credit Suisse Group AG and Royal Bank of Scotland Group Plc are among the other defendants in the case.

Rating agencies have been widely faulted by investors, regulators and Congress for contributing to the global credit and financial crises that began in 2007 by issuing high ratings on debt that did not deserve it.

Thornburg made “jumbo” home loans, larger than $417,000, to borrowers considered good credit risks, but collapsed after margin calls and a plunge in the value of mortgages it held.

The Santa Fe, New Mexico-based lender filed for bankruptcy on May 1, 2009, and is now called TMST Inc.

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Investors led by two pension funds, the Maryland-National Capital Park & Planning Commission Employees’ Retirement System, and the Midwest Operating Engineers Pension Trust Fund in Illinois, claimed the agencies issued false and misleading investment-grade ratings for Thornburg securities, and were paid “substantial” sums that compromised their independence.

But Browning said the ratings were distributed only to a “limited group” of investors, not the public at large.

He also said that unlike publicly traded companies, the trusts from which the securities were issued were not “public figures” entitled to more protections. Source: www.reuters.com/finance/personal-finance

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The vast world of financial services refers to the services offered by the global financial industry. This global industry includes: 1) financial institutions–banks, insurance companies, credit unions, or credit card issuers; 2) investment-related firms–broker-dealers, stock brokers, and investment funds; 3) consumer finance companies; and government-supported enterprise. In 2011, financial services accounts for about 20 percent of the (U.S.) total capitalization of the broad public market (S&P 500).

The largest financial services firms represent a small percentage of the global financial industry’s market capitalization. The idea of a large U.S. bank failure concerns many investors. Citi, the largest financial services firm, maintains just two to three percent market share in the U.S.

Let’s take a look at the primary components of the financial services industry. As we explore the what of financial services, we’ll discuss the who, why, when, where, and how of financial services, too! source: financialservices.about.com/

Last week, I had the pleasure of getting “straight talk” about wealth building strategies top financial planner Paul F. Ciccarelli, Vice President, CFP®, CLU®, ChFC®. Paul answered questions about the work he performs to build clients’ financial assets every day. Paul’s company, Ciccarelli Advisory Services, Inc. of Naples, Florida, has been named (2008) to both the “Winner’s Circle®” Top-Ranked Advisor Teams in America in Research Magazine and as a Top 100 Independent Financial Advisers in Barron’s Business and Financial Weekly. The practice is a second-generation wealth management business.

Paul’s father, Frank, and co-author Lauren Dutton (known by many as the “father of financial planning”) wrote a classic article about how to help clients achieve financial independence for the College of Financial Planning. We’ve shared the article because, like most great financial advice, how to build personal or client wealth isn’t a fast or easy trick. Building financial assets, especially if you’re starting with modest means, requires the ability to save some of your earnings (initial capital). Understanding the impact of taxes on financial planning–and the sharp pencil of your experienced Certified Financial Planner–will help build wealth over time.

The debate continues about whether CFPs should work as fee-only or FINRA and insurance-licensed salespeople. The important bottom line for many clients is the bottom line. If the CFP recommends a mix of financial products (insurance, cash management, and investments), the ability of the CFP’s recommendations should increase client wealth over time. The CFP’s ability to help the client save money on taxes and achieve higher real rates of return depends upon a deep understanding of the client’s assets and financial goals.source: financialservices.about.com/