Another legal battle over damage inflicted on conservative investors who were unwittingly lured into high risk investments is nearing an end in the Federal Court. As with several other successful cases on behalf of councils and non-profit organisations, this case was led by class action and complex financial instruments expert Amanda Banton and backed by litigation funder IMF Bentham. Late last week, Justice Michael Wigney gave in-principle approval to a mediated settlement between Muswellbrook Shire Council, as "representative applicant" in an action over sale of complex securities, known as Rembrandt Notes, against The Royal Bank of Scotland and McGraw-Hill International (UK) Limited, owner of Standard & Poor's.  The terms are largely confidential, and the amounts involved are almost completely hidden - however the series of notes to which this class action applies totalled A$50 million But what is clear is that part of the judgment paid out - literally and figuratively - on the language used by spruikers promoting a sophisticated financial product known as a constant proportion debt obligation or CPDO. Justice Wigney observed: "It is not easy to describe what a CPDO actually is. It has been described in the evidence as "a structured credit derivative indexed on a portfolio of investment grade debt which generates high coupon payments by dynamically leveraging a position in an underlying portfolio index of default swaps i.e. a CPDO comprises an index portfolio and a notional cash deposit".  "That description will suffice for present purposes, even though it will be almost entirely meaningless to the typical reader of average intelligence," he said. "The important point to note is that the CPDOs in question in this matter had features which, on just about any view, made them a high risk investment." In 2006 and 2007, when it was marketing the Rembrandt Notes, ABN Amro retained international credit ratings agency Standard & Poor's to assign a credit rating to the notes and, despite their AAA rating, the Rembrandt Notes ultimately failed. Investors in them suffered considerable losses. On 5 September 2012, Muswellbrook commenced these proceedings, based on allegations that ABN Amro failed to ensure that the risks to which purchasers of the Rembrandt Notes were exposed were adequately disclosed. Standard & Poor's was also alleged to have represented that the rating was based on reasonable grounds and that, in assigning the rating, it had exercised reasonable care and skill.  Muswellbrook alleged that those representations were misleading and deceptive, and that Standard & Poor's had thereby contravened the Corporations Act, the Fair Trading Act and the ASIC Act. In mid-2016, the parties arranged for the dispute to be mediated. No group member elected to opt out of the proceeding. Nor did any group member who had not previously registered with Muswellbrook's solicitors complete and return a registration notice. The mediation was successful, although the precise terms of the settlement remain confidential. Careful consideration has been given to the total amount payable to IMF Bentham, pursuant to the settlement scheme and the funding agreements.  "On balance it does not provide any proper basis for not