SEC settles with Egan-Jones over gov't ratings

Published on NewsOK Modified: January 22, 2013 at 2:33 pm •  Published: January 22, 2013
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NEW YORK (AP) — The Securities and Exchange Commission has barred Egan-Jones Ratings Co. from rating governments and issuers of other types of bonds as a recognized ratings agency for at least 18 months.

The SEC said Tuesday that the independent credit-rating agreed to the measure to settle charges that it had made false statements when applying to become a "Nationally Recognized Statistical Rating Organization" in 2008.

The firm will likely keep offering ratings on governments and asset-backed issuers, said Bill Hassiepen, co-head of Egan-Jones' ratings desk. They just won't carry the SEC's stamp of approval. "We can still issue those ratings," he said. "It's just that as far as the SEC is concerned they wouldn't exist."

Egan-Jones allegedly claimed to have ratings on 150 asset-backed securities and 50 governments. The SEC also said Egan Jones' application stated that it had been rating these securities since 1995. But the SEC said it couldn't find any such ratings available online or through other "readily accessible" venues.

In a statement, Robert Khuzami, director of the SEC's enforcement division, called the misrepresentation "a serious violation that undercuts the integrity of the SEC's ... registration process." The SEC also charged the firm with repeatedly violating conflict of interest provisions. According to one example cited by the SEC, two analysts at the firm owned securities backed by the same bond issuers they helped rate.