Credit rating company Egan-Jones today consented to a Securities and Exchange Commission order that it be barred from issuing asset-backed and government debt securities ratings for 18 months.
EJR and its founder and president Sean Egan agreed to settle charges with the SEC that the credit ratings company deliberately made false statements when registering to become a nationally recognized rating organization for asset-backed and government securities.
Egan's firm falsely stated in its registration application that it had been rating issuers of asset-backed and government securities since 1995, when in fact it had never issued ratings before filing its application in 2007, according to the SEC.
EJR and Egan consented to the SEC’s order without admitting or denying its findings.
"Egan caused EJR's violations of the conflict of interest and books and records violations by failing to ensure EJR's compliance with" provisions governing NRSROs that are intended to safeguard the integrity of credit ratings, according to the SEC.
EJR also violated conflict-of-interest rules when two of its analysts helped determine ratings for securities that they owned, according to the SEC.
Besides the ratings prohibition, Haverford, Pa-based EJR and Egan also agreed to correct deficiencies found by SEC examiners and submit a report—signed by Egan under penalty of perjury—detailing the corrective steps the firm has taken. EJR and Egan also agreed to conduct a self-review.
“Accuracy and transparency in the registration process are essential to the commission’s oversight of credit rating agencies,” said Robert Khuzami, director of the SEC’s Division of Enforcement. “EJR and Egan’s misrepresentation of the firm’s actual experience rating issuers of asset-backed and government securities is a serious violation that undercuts the integrity of the SEC’s NRSRO registration process.”