Sean Egan and Egan-Jones Rating Co. Charged By SEC

April 24, 2012 3:56 PM EDT
Today the Security and Exchange Commission (SEC) filed cease-and-desist proceedings against Egan-Jones Rating (EJR) Company and its founder, Sean Eagan.

The charge states that Eagan willfully misrepresented his experience as a rating company, claiming he had experience issuing ratings since 1995 although he had no experience in this area. The SEC proceeding also say that Egan knowingly caused EJR to provided inaccurate information on applications and annual certifications.

In one example, EJR allegedly falsely stated in submissions to the Commission that it was unaware whether its subscribers held long or short positions in particular securities.

According to the SEC, "EJR's salespeople were aware of certain clients' holdings, and in some instances knew whether clients had long or short positions. In at least three instances, information about whether a client had a long or short position was conveyed to Egan, EJR's primary analyst."

Another charge against EJR is that it failed to enforce its policy to address conflict of interest arising from employee ownership of securities, and allowed two analysts to participate in determining the credit rating for issues whose securities they owned.

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