Question

Moody’s provided a very good rating on ABC Co.’s financial because they have a long lasting relationship with each other. You bought ABC Co/s bond seeing such a high rating. A few months later, ABC Co. filed for bankruptcy. Is it your fault that you lost money because Moody’s rating was wrong?

Answer 1

The rating given by a credit rating agency comes with a disclaimer that the rating is based upon available public information and analysis done to the best of their capability. The agency does not give any guarantee that the rating provided will hold true. It is up to the investor to trust the rating so provided. Hence if the investor has purchased the bond by trusting the rating provided by Moddy’s it is his personal choice and the agency is not responsible for the decision taken by the investor.