S&P seeks to limit liability for its ratings

Standard & Poor's may alter the established dynamics of companies seeking to sell term debt in the retail market following their decision to drop plans to apply for a retail financial services licence. S&P will still seek a wholesale financial services licence to comply with new ASIC rules.

The S&P decision means that the firm's opinions on credit ratings, while widely available, won't be readily referred to by issuers of debt that are pitching to retail investors. They will no longer appear in a prospectus, for example.

S&P is blaming the requirement to participate in a dispute resolution scheme, and the powers of the Financial Ombudsman Service, for its decision.

S&P managing director for Australia and New Zealand, John Bailey, wrote in a media release that: "In terms of the requirements for a retail licence, we are concerned that membership of a local EDR [external dispute resolution] scheme would interfere with the analytical independence of our rating opinions and undermine the global consistency and comparability of ratings."

Bailey continued that "the scheme could change the substance of a rating and result in the creation of dual credit ratings - an Australian 'EDR' domestic credit rating and a 'rest of the world' credit rating.

"Because the local ombudsman would effectively be second guessing S&P's analysts, we believe this would ultimately create investor confusion and harm financial markets," Bailey wrote.

S&P said its credit ratings will no longer be available to Australian retail investors from January 1.