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Moody’s, S&P Must Face Fraud Claims in Subprime Suit

Moody’s Corp. and Standard & Poor’s lost a bid for dismissal of fraud claims in a suit by investors claiming the companies falsely assigned inflated ratings to notes sold by Morgan Stanley that were backed by subprime mortgages.

U.S. District Judge Shira Scheindlin yesterday declined a request to throw out fraud claims against the two rating companies and a claim of aiding and abetting fraud against Morgan Stanley. Scheindlin narrowed the suit, dismissing claims by three of the 15 plaintiffs.