NEW YORK (TheStreet) -- Egan-Jones, a competitor ratings agency to Moody's and Standard & Poor's, has been charged by the Securities and Exchange commission for "material misrepresentations and omissions" in its July 2008 application to register as a certified agency with securities regulators.
In its charge, the SEC says that when applying to be what's called a "Nationally Recognized Statistical Rating Organization," Egan-Jones claimed it had rated asset-backed securities and government debt obligations; however, the firm had no proof of such ratings. The SEC also said that it found weaknesses in Egan-Jones analyst compliance policies and its disclosures relating to conflicts of interest in rating securities.
|Sean Egan of Egan Jones|
The firm and its co-founder Sean Egan were recognized for prescient calls about weaknesses in the U.S. banking system ahead of the 2008 financial crisis, and have since made headlines for controversial downgrades to the debt of issuers ranging from the U.S. government to investment bank Jefferies (JEF).
"The SEC's Division of Enforcement alleges that in its 2008 application, EJR falsely stated that as of the date of the application it had 150 outstanding ABS issuer ratings and 50 outstanding government issuer ratings... In fact, at the time of its July 2008 application, EJR had not issued -- that is, made available on the Internet or through another readily accessible means -- any ABS or government issuer ratings, and therefore did not meet the requirements for registration as an NRSRO in these categories," the SEC said in its charge.In its charge, the SEC went on to say that Egan-Jones continued to misstate the scope of its ratings in subsequent annual certifications to the SEC. Meanwhile, the regulator also said that Egan-Jones failed to properly manage conflicts of interest by barring analysts from owning securities that it rates and misstated whether it knew subscribers were long or short some of those securities. "The SEC's Division of Enforcement alleges that Egan provided inaccurate information that was included in EJR's applications and annual certifications. He signed the submissions and certified that the information provided in them was "accurate in all significant respects," when he knew that it was not. Egan also failed to ensure EJR's compliance with the recordkeeping requirements and conflict-of-interest provisions."
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV