SEC Emerges From Carbonite Deep Freeze, Sues Egan-Jones

Tyler Durden's picture

Just in case one is wondering what is a greater crime in America: vaporizing $1.5 billion in client money or having the temerity to downgrade the US (twice), JP Morgan and Morgan Stanley, here is the SEC with the answer:


Somewhere Jon Corzine is cackling like a mad cow.

More on Egan-Jones' inhuman crime (and PDF)

Egan-Jones Ratings Co. and Sean Egan Charged with Making Material Misrepresentations to SEC

Washington, D.C., April 24, 2012 — The Securities and Exchange Commission today announced charges against Egan-Jones Ratings Company (EJR) and its owner and president Sean Egan for material misrepresentations and omissions in the company’s July 2008 application to register as a Nationally Recognized Statistical Rating Organization (NRSRO) for issuers of asset-backed securities (ABS) and government securities. EJR and Egan also are charged with material misrepresentations in other submissions furnished to the SEC and violations of record-keeping and conflict-of-interest provisions governing NRSROs.

The Commission issued an order instituting proceedings in which the SEC’s Division of Enforcement alleges that EJR — a credit rating agency based in Haverford, Pa. — submitted an application to register as an NRSRO for issuers of asset-backed and government securities in July 2008. EJR had previously registered with the SEC in 2007 as an NRSRO for financial institutions, insurance companies, and corporate issuers.

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. EJR further falsely stated in its 2008 application that it had been issuing credit ratings in the ABS and government categories as a credit rating agency on a continuous basis since 1995. 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. EJR continued to make material misrepresentations regarding its experience rating asset-backed and government securities in subsequent annual certifications furnished to the SEC.

The SEC’s Division of Enforcement also alleges that EJR made other misstatements and omissions in submissions to the SEC by providing inaccurate certifications from clients, failing to disclose that two employees had signed a code of ethics different than the one EJR disclosed, and inaccurately stating that EJR did not know if subscribers were long or short a particular security.

The SEC’s Division of Enforcement further alleges that EJR violated other provisions of Commission rules governing NRSROs. EJR failed to enforce its policies to address conflicts of interest arising from employee ownership of securities, and allowed two analysts to participate in determining credit ratings for issuers whose securities they owned. EJR also failed to make and retain certain required records, including a detailed record of its procedures and methodologies to determine credit ratings and e-mails regarding its determination of credit ratings.

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.

The SEC’s Division of Enforcement alleges that, by the conduct described above, EJR willfully violated Exchange Act Sections 15E(a)(1), 15E(b)(2), 15E(h)(1) and 17(a), and Rules 17g-1(a), 17g-1(b), 17g-1(f), 17g-1(a)(2), 17g-2(a)(6), 17g-2(b)(2), 17g-2(b)(7), and 17g-5(c)(2). The Division of Enforcement further alleges that by the conduct described above, Egan willfully made, or caused EJR to make, material misstatements in its Form NRSRO, and caused or willfully aided, abetted, counseled, commanded, induced or procured EJR’s violations of Sections 15E and 17(a) of the Exchange Act and Rules 17g-1, 17g-2, and 17g-5.

The SEC’s investigation was conducted by Stacy Bogert, Pamela Nolan, Alec Koch, and Yuri Zelinsky. The SEC’s litigation will be led by James Kidney.

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Shizzmoney's picture

Well there goes him being on CNBC ever again.

Mr Lennon Hendrix's picture

This is your government, and it's ending one minute at a time.

Michael's picture

Just slash the SEC budget by 90%. They don't do anything for American civilians anyway.

DormRoom's picture

if you did that the tranny porn industry would collapse.

nope-1004's picture

This gov't has 2 purposes:

1)  Convict those that don't play by the fake rules and refuse to continue the fraud, lies, and cooked bank stats through the MSM.

2)  Invade, destroy, and occupy those countries that don't sell oil in USD.

The US has become a JOKE.  Full of overweight, lazy, "professional" financial innovative cubicle workers, unproductive and illiterate, whose only means to "get ahead" is through credit.  That is a supreme JOKE.  There is no economy anymore.


Bicycle Repairman's picture



And just to be sure that everyone gets the point, they sue Egan personally.

Any more questions?

trebuchet's picture


Zero Govt's picture

Egan-Jones gets prosecuted on "material misrepresentations" (trivialities) while the other Credit Ratings Agencies get zippo on national and international mortgage fraud

the SEC are not only defending fraudsters, showing complete contempt for the regulations but they're also bringing the US's biz reputation into disrepute

Bay of Pigs's picture

Fitch upgrades Ford. LOL...

SDRII's picture

Must keep subprime credit flowing

NotApplicable's picture

Good, as there's never been anything reputable about it.

Hedgetard55's picture

I wanted to give you a greenie but your font prevents it.

Benjamin Glutton's picture

It was all good when our fascist government was imposing itself on the rest of the planet.


Now that it has turned attention to you and me it's not so funny anymore.


was over in the 60's.

Havana White's picture

"Was over in the 60's."  Indeed. Hijacked on November 22, 1963.

chipshot's picture





Waffen's picture

Who watches the watchers?

For fucks sake, everywhere I look this world is a fucking upside down joke. Everything I was taught as a child about how our country stands for goodness, honesty, truth and justice was a bunch of rotten maggots.

I have been lied to all my life and I am pissed off on epic levels.

machineh's picture

At least maggots perform a useful service in the food chain.

More than you can say for the SEC.

NewWorldOrange's picture

The extent of regulatory capture in the U.S. would probably shock most people if they really knew. Patrick Byrne and his team of investigators have looked at this for years and its great reading for anyone wanting to see what really goes on with the SEC or with "regulatory" agencies generally:

"As if often the case, it all begins with Jim Cramer."

SheepDog-One's picture

I hear you LC Waffen Im totaly ready to be in total dissent and non compliance of it all even if it kills me! Fuck all this! A lab rat wouldnt tollerate it!

The trend is your friend's picture

I wish I had the balls to not pay taxes and tell the GOVERNMENT to go fuck themselves for destroying this country

NewWorldOrange's picture

Cindy Sheehan is on trial right now for just that. Hope the jury nullifies (right...)

jeff montanye's picture

also check out what has happened to the free interplay of ideas in the groves of academe.

BooMushroom's picture

Only works if you're a bigwig crony capitalist, or the Secretary of the Treasury. Little guys like you and me are screwed.

Nobody For President's picture

"I have been lied to all my life and I am pissed off on epic levels."


Welcome to the (fight) club.

blunderdog's picture

You think he's got it bad, consider that poor James Kidney guy.  Sounds like he's a real pisser.

jeff montanye's picture

too bad it's in name only.  there sure are a lot of toxins in the financial world that need some straining out and flushing down the toilet (yes jon corzine, i'm talking to you).

jus_lite_reading's picture

>>"...and I am pissed off on epic levels."


You and me both... good thing I do yoga

WonderDawg's picture

Kickboxing classes work, too.

NewWorldOrange's picture

Where's Nurse Ratchet when you need her? This country is a cuckoo's nest.

5880's picture

yuri b zelinsky of tacoma md?

I love google

fightthepower's picture

Fuck you Bernanke!

BLACK_DOG's picture

she's a dyke? sorry i ment "!" 

supafuckinmingster's picture

Mary Shapiro, Ben Bernanke, Alan Greenspan, Janet Yellen, Donald Kohn, Tim all leads to Rothschilds...Morgans...Chases'....wake up are a vassal of Judaism. And not the Chomsky, or Jon Stewart no......I'm talking the Yitzhat Shamir type.

Dr. Engali's picture

The world remains silent while the honest players are slaughtered and the criminals are rewarded. We're fucked.

Mr Lennon Hendrix's picture

Now the SEC can go back to watching tranny porn, thank goodness!

UP Forester's picture

The SEC was booted off of the midget tranny porn sites for being too twisted.

That's why they have to look like they're doing something, for a change.

ragequit's picture

tranny porn stars need to make money too.  you people are so cruel.

LongSoupLine's picture

I am simply and utterly disgusted.

I honestly fear for the future of ZH at this point.

HarryM's picture

I'm pretty sure anyone who visits this site has their name added to a list

Dr. Engali's picture

I'm pretty sure you can say that about this site and a few other's. I keep waiting for the day when I go to the Hedge for news and I see an "This page is no longer available" message  on the screen. 

blunderdog's picture

Better for TPTB to leave the site alone.  The fringies that hang here would be more motivated to go do stuff if they weren't all online posting their daily rants.

NotApplicable's picture

Oh, they'll leave ZH alone for the time being. For them, it's a free honeypot to observe. It will only be taken out if it's popularity surpasses HuffPo (or some similar site).

My barometer is watching the visibility of (and At some point, Krugman will lose his last follower to them, and MSM ridicule will no longer be effective enough to keep the herd away. Then they'll start attacking it in a last ditch effort to scare the herd away, lest they be tainted as a racist (because somehow freedom is really all about slavery).

Of course, by then we'll all be facebooking from the comfort of our FEMA camp, fully plugged into the Matrix.

blunderdog's picture

    It will only be taken out if it's popularity surpasses HuffPo (or some similar site).

Yeah, right.

You're suggesting that TPTB that are secretly running everything will shut down a great source of intelligence after it attracts a large enough group of

Guess you're not perceiving the incredibly stupid part of that prediction, huh?

cbxer55's picture

Funny you mention that. I work for the government, and visit this site during my lunch break, from a work computer. It has not been banned or black-balled yet.

 I am not a desk rider. I am a Sheet Metal Mechanic, and I make a lot less than you probably think I do. My work station is inside fuel tanks on communications aircraft.

Luch is over, gotta go.



Waffen's picture

Doubtful, what happens when you remove the steam valves?