Assiduous Reader JP sends in a clipping detailing the interesting defence to the fraud charges against S&P:
Now, lawyers defending the company against the Justice Department’s recent civil lawsuit say that statements about independence and objectivity are “puffery” and were never meant to be taken at face value by investors.
…
In its formal defense filed Monday, S&P pointed to two earlier court decisions where judges ruled that such statements by the firm were puffery and therefore can’t form the basis for a fraud claim.
…
“Even if it’s a viable legal argument, it’s a pretty unattractive argument for S&P to be putting forward since they’re basically in the business of charging clients for their reputation,” said Samuel Buell, a law professor at Duke University and a former federal prosecutor. “What they’re saying here is, ‘When we’re talking to investors about our own reputation, we’re engaging in meaningless puffery.’ ”“That’s the whole point of the rating agencies, their seal of approval,” Mr. Buell said.
I disagree with Mr. Buell’s characterization of ‘the whole point of the rating agencies’. They don’t provide a “seal of approval” to anything – they provide an opinion on the credit-worthiness of the firm, or instrument. Since the issuers use this opinion to help sell their product, it can be fairly characterized as puffery, although not entirely meaningless.
The CRAs do not do anything a competent analyst cannot do – except, of course, for using material non-public information in the course of their work, a provision of Canadian and US securities laws I despise. Their value is: at least it’s a reasonably consistent opinion across companies; their 100-year track record is excellent (they are being blamed for the credit crisis – that’s like blaming the weatherman for Hurricane Sandy); and they serve as a public flash-point for concerns about creditworthiness that may spur action when times are tough.
It was an inconsequential day on the Canadian preferred share market, with PerpetualPremiums down 5bp, FixedResets off 4bp and DeemedRetractibles gaining 2bp. Volatility was low. Volume was on the high side of average.
HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly |
|||||||
Index | Mean Current Yield (at bid) |
Median YTW |
Median Average Trading Value |
Median Mod Dur (YTW) |
Issues | Day’s Perf. | Index Value |
Ratchet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.1403 % | 2,594.7 |
FixedFloater | 3.97 % | 3.20 % | 33,820 | 18.73 | 1 | -0.4167 % | 4,133.4 |
Floater | 2.68 % | 2.87 % | 86,876 | 20.07 | 4 | -0.1403 % | 2,801.6 |
OpRet | 4.80 % | 1.30 % | 60,980 | 0.15 | 5 | -0.0077 % | 2,609.6 |
SplitShare | 4.80 % | 4.26 % | 120,166 | 4.11 | 5 | -0.0079 % | 2,959.7 |
Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.0077 % | 2,386.3 |
Perpetual-Premium | 5.19 % | 3.60 % | 91,979 | 0.84 | 32 | -0.0454 % | 2,379.5 |
Perpetual-Discount | 4.84 % | 4.86 % | 180,079 | 15.71 | 4 | -0.1519 % | 2,685.9 |
FixedReset | 4.91 % | 2.80 % | 256,150 | 3.56 | 80 | -0.0431 % | 2,506.3 |
Deemed-Retractible | 4.88 % | 3.50 % | 135,277 | 1.53 | 44 | 0.0203 % | 2,453.7 |
Performance Highlights | |||
Issue | Index | Change | Notes |
TRP.PR.B | FixedReset | 1.02 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-04-25 Maturity Price : 23.45 Evaluated at bid price : 24.75 Bid-YTW : 2.47 % |
Volume Highlights | |||
Issue | Index | Shares Traded |
Notes |
MFC.PR.D | FixedReset | 177,264 | Nesbitt crossed 24,100 at 26.39. Scotia bought two blocks from Desjardins, of 25,000 and 16,900 shares, both at 26.34. Scotia crossed 15,000 at the same price. Finally Nesbitt bought 13,500 from Desjardins at 26.34. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-06-19 Maturity Price : 25.00 Evaluated at bid price : 26.33 Bid-YTW : 2.49 % |
CIU.PR.B | FixedReset | 64,400 | Nesbitt crossed 50,000 at 26.56. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-06-01 Maturity Price : 25.00 Evaluated at bid price : 26.55 Bid-YTW : 1.93 % |
BNS.PR.T | FixedReset | 56,720 | Nesbitt crossed 50,000 at 26.00. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-04-25 Maturity Price : 25.00 Evaluated at bid price : 25.90 Bid-YTW : 2.50 % |
GWO.PR.P | Deemed-Retractible | 56,378 | Nesbitt crossed 50,000 at 26.50. YTW SCENARIO Maturity Type : Call Maturity Date : 2021-03-31 Maturity Price : 25.00 Evaluated at bid price : 26.50 Bid-YTW : 4.58 % |
TD.PR.Y | FixedReset | 53,975 | RBC bought 10,000 from CIBC at 25.00, then crossed 16,000 at 24.99. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.93 Bid-YTW : 2.99 % |
CU.PR.F | Perpetual-Premium | 43,260 | Scotia crossed 40,000 at 25.55. YTW SCENARIO Maturity Type : Call Maturity Date : 2022-06-01 Maturity Price : 25.00 Evaluated at bid price : 25.45 Bid-YTW : 4.34 % |
There were 36 other index-included issues trading in excess of 10,000 shares. |
Wide Spread Highlights | ||
Issue | Index | Quote Data and Yield Notes |
BAM.PF.A | FixedReset | Quote: 26.50 – 26.92 Spot Rate : 0.4200 Average : 0.2887 YTW SCENARIO |
MFC.PR.F | FixedReset | Quote: 25.11 – 25.54 Spot Rate : 0.4300 Average : 0.3164 YTW SCENARIO |
HSE.PR.A | FixedReset | Quote: 25.76 – 26.33 Spot Rate : 0.5700 Average : 0.4612 YTW SCENARIO |
BAM.PR.X | FixedReset | Quote: 25.61 – 25.91 Spot Rate : 0.3000 Average : 0.2112 YTW SCENARIO |
BAM.PR.G | FixedFloater | Quote: 23.90 – 24.30 Spot Rate : 0.4000 Average : 0.3157 YTW SCENARIO |
TD.PR.O | Deemed-Retractible | Quote: 25.75 – 26.02 Spot Rate : 0.2700 Average : 0.1915 YTW SCENARIO |
BNS.PR.A Rockets to Premium on Debut
April 27th, 2013BNS.PR.A is the new FloatingReset that resulted from a partial exchange of BNS.PR.P on the latter issue’s first Exchange Date.
BNS.PR.A is the first FloatingReset to exist, paying 205bp over 3-Month Canada Treasury Bills. It will be tracked by HIMIPref™ and will be assigned to the FixedReset index until there are ten Floating Resets (of investment grade and non-derisory volume), at which point a new FloatingReset index will be created.
Vital statistics are:
Maturity Type : Call
Maturity Date : 2013-05-26
Maturity Price : 25.50
Evaluated at bid price : 25.65
Bid-YTW : -5.53 %
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