SEC Bars Egan-Jones From Rating The US And Other Governments For 18 Months

Tyler Durden's picture

It is refreshing to see that the SEC has taken a much needed break from its daily escapades into and is focusing on what is truly important, such as barring outspoken rating agency Egan-Jones from rating the US and other governments. From the SEC: "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. EJR and Egan also agreed to correct the deficiencies found by SEC examiners in 2012, and submit a report – signed by Egan under penalty of perjury — detailing steps the firm has taken." Hopefully the world is no longer insolvent in July of 2014 when this ban runs out.

From the SEC:

Egan-Jones and Founder Sean Egan Agree to 18-Month Bars from Rating Asset-Backed and Government Securities Issuers as NRSRO


The Securities and Exchange Commission today announced that Egan-Jones Ratings Company (EJR) and its president Sean Egan have agreed to settle 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.


EJR and Egan consented to an SEC order that found EJR falsely stated in its registration application that the firm had been rating issuers of asset-backed and government securities since 1995 — when 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.


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. EJR and Egan also agreed to correct the deficiencies found by SEC examiners in 2012, and submit a report – signed by Egan under penalty of perjury — detailing steps the firm has taken.


“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.”


Antonia Chion, Associate Director of the SEC’s Division of Enforcement, added, “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.”


Egan and his firm were charged last year for falsely stating on EJR’s July 2008 application to the SEC that it had 150 outstanding asset-backed securities (ABS) issuer ratings and 50 outstanding government issuer ratings, and had been issuing credit ratings in these categories on a continuous basis since 1995. Egan signed and certified the application as accurate. According to the SEC’s order, EJR had not issued any ABS or government issuer ratings that were made available through the Internet or any other readily accessible means. Therefore, EJR did not meet the requirements for registration as a NRSRO in these classes. The Commission found that EJR continued to make material misrepresentations about its experience in subsequent annual certifications. EJR also made other misstatements in submissions to the SEC, and violated recordkeeping and conflict-of-interest provisions governing NRSROs — which are intended to safeguard the integrity of credit ratings.


EJR and Egan agreed to certain undertakings in the SEC’s order, including that they must conduct a comprehensive self-review and implement policies, procedures, practices, and internal controls that correct issues identified in the SEC’s order and in the 2012 examination of EJR conducted by the SEC’s Office of Credit Ratings. EJR and Egan consented to the entry of the order without admitting or denying the findings. The order requires them to cease and desist from committing or causing future violations.


The SEC’s investigation was conducted by Stacy Bogert, Pamela Nolan, Alec Koch, and Yuri Zelinsky. The SEC’s litigation was led by James Kidney with assistance from Alfred Day and Ms. Nolan. The related examinations of EJR were conducted by staff from the SEC’s Office of Credit Ratings, Office of Compliance Inspections and Examinations, and Division of Trading and Markets. Examiners included Michele Wilham, Jon Hertzke, Mark Donohue, Kristin Costello, Scott Davey, Alan Dunetz, Nicole Billick, David Nicolardi, Natasha Kaden, and Abe Losice.

And to think of all the actions the SEC took against S&P, Moodys and Fitch for rating AAA-rated suprime junk weeks before the market imploded. Oh wait, the SEC did nothing there, because, you see, they filed their NRSRO applications without any glitches.

So be careful S&P: you are on thin ice here with your 2011 downgrade of the US, and likely next in the SEC's sights: better go through all those registration applications and make sure every comma is in place.

Now we look forward to news that Moodys and Fitch are about to get the Congressional medal of honor.


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Overfed's picture

Telling the truth is treason in an empire of lies.

Stackers's picture

“Even if you are a minority of one, the truth is the truth.” - Gandhi

Pladizow's picture

"Money power denounces, as public enemies, all who question its methods or throw light upon its crimes." - Jennings Bryan

Do you think when EJ rates again in 18 months that they may have a chip on their sholders?

knukles's picture

Room 101 at the local Free Man Summer Camp awaits the informed whose reality diverges from official script.

Say What Again's picture

Forget about "Occupy Wall St."

We need to "Occupy the SEC!"


Pladizow's picture

Lie on your resume and feel the wrath of an incompetent agency, fuck the world (Moodys, S&P) - No Problem!

economics9698's picture

18 months?  The whole world will know about this fiat shit pile by then.

THX 1178's picture

The SEC sez, "You're not smart enough to say nuthin!"

Egan Jones replies, "I'm rubber, You're glue..."

HoofHearted's picture

So all this shit continues for the next 18 months with nobody out there to tell the truth?

Fuck me running. I'm about ready to just pack it all up and join Simon Black, lying about all the cool places I've been going and fooling people into sending me money. I mean, I'm headed someplace less dictatorial...maybe Uganda would work????

The Limerick King's picture



Egan is getting a slap

Their ratings they're trying to scrap

Jones should have guessed

He'd be labelled a pest

By saying the US is crap!

Vlad Tepid's picture



"The emperor, he has no clothes!"

said Egan in kingly repose.

With manner quite cross

said "We'll show you who's boss:"

the SEC too's been exposed.


strannick's picture

Dont forget the vile CFTC when apportioning scorn

Commisioner Jill Sommers 

Commisioner Bart Chilton

Chairman Gary Gensler

Commisioner Scott O'Malia

Commisioner Mark Wetjen


phyuckyiu's picture

I hate it when other fascist governments blackmail critics to get them to STFU. Oh wait....

Overfed's picture

Love Ron Paul. He should run for Prez. Oh, wait.....

Badabing's picture

EJ - the king has no clothes!

SEC- oh yes he does

tenpanhandle's picture

Do you solemnly swear not to tell the truth, under penalty of perjury?

El Oregonian's picture

...And I hear that they have 'Movie Night' for the staff every Thursday evening. This Thursday is "Sally does the SEC" starring Barry (playing Sally) and the Crew...

The_Dude's picture

Look who's heading for the door....Anyone have any ideas where he is going to land?


Enforcement Director Robert Khuzami to Leave SEC

StychoKiller's picture

Hmm, Eric Holder is already NOT enforcing Law(s) at the DOJ,...I got nuthin.

Spastica Rex's picture

Hey - Mohandas Ghandi was a socialist, a pacifist, and he made snide comments about Christians. Why would the hoi polloi want anything to do with him, or anything else off-script?

Citxmech's picture

Well, he did manage to orchestrate the end of British rule in India - I think he provided us with a few good lessons as to at least one successful strategy.

NotApplicable's picture

LOL, wait... you think British rule has ended... ANYWHERE?

You need to step back away from the facade of "self-determination" erected by the empire.

Citxmech's picture

Damn - you make it sound like Gandhi was a co-conspirator.

Do you think The American Revolution was a failure because of the Federal Reserve Act?

The act of resistance against the forces of greed, graft, corruption, and subjugation is an ongoing process that must be continually renewed.  In other words, it's an eternal war that will likely never be won - but that also means it can not be completely lost either.


Andre's picture

Ummm... Something about a guy named Nehru come to mind?

Hook Line and Sphincter's picture

Yes Spaz, and much much more...

We believe as much in the purity of race as we think they do. … We believe also that the white race of South Africa should be the predominating race.” Mohandas K. Gandhi

In a letter to Hitler in 1941, Gandhi wrote: “Nor do I believe that you are the monster described by your opponents.” Mohandas K. Gandhi


Hitler killed 5 million Jews. … But the Jews should have offered themselves to the butcher’s knife. They should have thrown themselves into the sea from cliffs.” Mohandas K. Gandhi

Regarding Washington, he wrote: “I do not hesitate to say that it is highly unlikely that had I lived as (his contemporary), I would have called (him) a misguided patriot.” Mohandas K. Gandhi

Bananamerican's picture

Do you think when EJ rates again in 18 months that they may have a chip on their sholders?"
Who cares man. That's 18 more months of AAA rated looting!

glenlloyd's picture

I see this as being much more devestating than just 18 months without abs or sov ratings. It's an attempt to fully discredit EJ for several years. If they can't rate these for 18 months where will the track record be for ratings after the 18 months?

The big question is what happens after the 18 months is up? Another review by the (worthless) SEC or what then?

Also we don't know all the specifics of the case and how much BS was made up at the SEC level.

It's interesting that the SEC gets all hot-n-bothered about this but rarely does anything else without being exposed by private citizens as ignoring a blatant ponzi or in the case of Corzine letting the man walk away free....

HoofHearted's picture

Coming soon, the new and improved "Jones-Egan" rating agency....

Lohn Jocke's picture

Conflict of interests provisions? Whoste interests?

Id fight Gandhi's picture

Gandhi? Maybe. Even so, everyone needs a good beat down occasionally. Ill take my licks.

Divided States of America's picture

Egan Jones was probably not using the complete uncensored versions of porn that S&P and Moody's were using. They also didnt do enough stress testing of the porn, not enough multi racial scenarios, animal to human, and extreme 10 guys - 1 girl outlier events. Hence SEC found deficiencies in their rating process.

blu's picture

Back to the re-education camp! 18 months and they will be free of such deficiency.

OpenEyes's picture

Why didn't the SEC just suspend Truth for 18 months and offer to fine or jail anyone who speaks it?

Where is Jon Corzine?

Who is John Galt?

Citxmech's picture

I think that's exactly what they did. . .

Pairadimes's picture

I think they just did.

Shorter SEC: just shut up, and take your percentage like good little boys and girls.

xtop23's picture

What. The. Fuck.

A ratings agency that doesn't perform ratings ....... why not, right!!?!?

It's like a goddamned Twilight Zone episode. Someone queue up Rod Serling.

Theosebes Goodfellow's picture

Imagine, if you will, a country's financial regulators prohibiting a ratings company from opining on that country's economic instruments for a year and a half while a second-term socialist president "fundamentally changes" how a constitutional republic has operated for over two hundred years. Sound terrifying? Stranger things are sure to come about, here in... The Obama Zone!

marathonman's picture

Pleased to meet you.  Hope you guess my name.  But what's puzzling you is the nature of my game.

MFLTucson's picture

Lies are all that is left!