Australia's Federal Court has ruled that credit ratings agency Standard & Poor's (S&P) misled investors before the global financial crisis.
S&P gave its safest credit rating, AAA, to complex and risky securities, which later lost most of their value.
In what is regarded as a landmark ruling, the court ordered S&P and the bank which arranged the product, ABN Amro, to pay damages to investors.
S&P said it planned to appeal against the decision.
"We are disappointed with the Court's decision, we reject any suggestion our opinions were inappropriate and we will appeal [against] the Australian ruling, which relates to a specific CPDO rating," S&P, one of the world's big three ratings agencies, said in a statement.
The ruling is the first of its kind on a rating agency's liability for investors' losses.
Federal Court Justice Jayne Jagot said that both S&P and ABN Amro were "misleading and deceptive" in the rating of two structured debt issues in 2006, which she agreed were "grotesquely complicated".
She said the agency had published false information and given "negligent misrepresentations" to potential investors about the riskiness of two financial products.
The AAA rating conveyed a message that the likelihood of financial obligations being met was "extremely strong".
It was also "a representation that S&P had reached this opinion based on reasonable grounds and as the result of an exercise of reasonable care when neither was true and S&P also knew not to be true at the time made," Judge Jagot said.
The judge was also critical of the actions of ABN Amro, saying it was "knowingly concerned" in S&P's misleading and deceptive conduct, and used the AAA rating on its products to denote a reliability that it knew was not accurate.
She pointed to errors and omissions throughout the rating process, including, in some cases, S&P not doing its own calculations and relying on the ones ABN had submitted about the likely performance of the products.
ABN knew what it needed to tell S&P about the product in order to get the highest possible AAA rating, the judge said, and tried to persuade S&P to adopt its own inputs "in numerous communications", including five instances in which it wrongly asserted key pieces of financial information.
ABN Amro bank was sold to three banks in 2007, including the Royal Bank of Scotland which took over its Australian activities.
In a statement RBS said it was "studying this long and complex report and considering our next steps".
The case was brought against S&P and ABN Amro Bank by several Australian local governments which lost millions when the value of the investments was virtually wiped out during the financial crisis.
Judge Jagot said S&P and ABN Amro would have to pay 30m Australian dollars ($31m; £19m) in damages to the authorities.
IMF Australia, a company listed on the Australian Stock Exchange which funds legal claims, said the ruling was "likely to have global implications and be felt hardest in Europe and the US, where similar products were sold to banks and pension funds".
The firm said this could pave the way for investors in Europe to recover significant losses from both S&P and ABN Amro.
It estimates that 2bn euros ($2.6bn; £1.6bn) of the same sort of financial products, called CPDOs or constant proportion debt obligations, were sold in Europe.
"Today's court ruling will enable the councils to recover a significant proportion of their losses that will now be available to provide services for their communities," said IMF Australia director John Walker.
"It is welcome news and a relief for the tens of thousands of Australians who make up these local communities as they rely on the range of services provided by their local council."