The SEC’s press release touting its triumph over rebel-without-a-cause rating agency Egan-Jones gives just the slightest impression that it was written in embarrassment. A trope of SEC press releases is “[thing we are enforcing] is among the most important things in the whole wide universe”; this is hard to say with a straight face when the defendant is guilty “essentially, of filling out forms wrong,” as Jesse Eisinger put it last year. But two SEC enforcement bigwigs give it their best shot:
“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.”
To be clear what happened in the Egan-Jones case was, as we’ve discussed before:
- In 2008, Egan-Jones told the SEC “we have issued 200 ratings and they are on the internet.”
- A few months later, Egan-Jones corrected the number of ABS and muni ratings from 200 to 23.
- The correct number was actually zero, as you could tell by looking at E-J’s website.
- Four years later, the SEC noticed.
“‘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,” though not so essential that the SEC would get around to noticing admitted inaccuracy inside of four years.
So, I mean: don’t fill out forms wrong! Read more »