Egan-Jones's violations were significant and recurring - Antonia Chion, SEC Assoc. Director.

[ by Howard Haykin ]

Egan-Jones Ratings Company and its president Sean Egan accepted 18-month bars to settle SEC charges that they made willful and material misstatements and omissions when registering with the SEC to become a Nationally Recognized Statistical Rating Organization (NRSRO) for asset-backed securities and government securities.

As noted in the SEC Order, Egan-Jones Ratings ("EJR") falsely stated in its registration application that the firm had been rating issuers of asset-backed and government securities since 1995.  In truth, the firm had not issued such ratings prior to filing its application.  The SEC’s order also found that EJR violated conflict-of-interest provisions, and that Egan caused EJR's violations. 

Further Settlement Terms.     EJR and Egan agreed to correct the deficiencies found by SEC examiners in 2012, and submit a report - signed by Egan under penalty of perjury - detailing the steps taken.  EJR and Egan made a settlement offer that the Commission determined to accept. Under the settlement, EJR and Egan agreed to be barred for at least 18 months from rating asset-backed and government securities issuers as an NRSRO. 

Antonia Chion, Associate Director of the SEC Enforcement had this to say:  “Provisions requiring NRSROs to retain certain records and address conflicts of interest are central to the SEC’s oversight of credit rating agencies.  EJR’s violations of these provisions were significant and recurring.”

SEC Findings and Allegations.   In 2012, Egan and his firm, Egan-Jones Ratings, provided false information on its July 2008 application to the SEC, claiming to have: (i) conducted 150 outstanding asset-backed securities (ABS) issuer ratings; (ii) 50 outstanding government issuer ratings; and, (iii) been issuing credit ratings in these categories on a continuous basis since 1995.  Egan signed and certified the application as accurate. 

• Yet, EJR had not issued any ABS or government issuer ratings that were made available through the Internet or any other readily accessible means. 
• Accordingly, EJR did not meet the requirements for registration as an NRSRO in these classes. 
• EJR continued to materially misrepresent its experience in subsequent annual certifications.
• EJR made other misstatements in submissions to the SEC.
• EJF violated recordkeeping and conflict-of-interest provisions governing NRSROs.

SEC Staff Credits.   Investigation conducted by:  Stacy Bogert, Pamela Nolan, Alec Koch, Yuri Zelinsky. Litigation led by James Kidney, assisted by Alfred Day, Ms. Nolan. Related exams of EJR conducted by Michele Wilham, Jon Hertzke, Mark Donohue, Kristin Costello, Scott Davey, Alan Dunetz, Nicole Billick, David Nicolardi, Natasha Kaden, Abe Losice - staffers with SEC’s Office of Credit Ratings, OCIE, or Division of Trading and Markets.

For further details, go to:   [SEC PR 13-7, 1/22/13] and [SEC Order].