The SEC this week announced several enforcement actions, which included charges brought against a ratings company and its owner and president and against a mortgage company, as well as a settlement reached in an insider trading case.
On Tuesday the SEC announced it had charged Egan-Jones Ratings Co. (EJR), and its owner and president, Sean Egan, for what it said were 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.
Both the company and the man are also charged with material misrepresentations in other submissions furnished to the SEC and violations of record-keeping and conflict-of-interest provisions governing NRSROs.
The SEC’s Division of Enforcement alleges that Haverford, Pa.-based EJR in its application stated falsely that it had 150 outstanding ABS issuer ratings and 50 outstanding government issuer ratings, as well as claiming that it had been issuing credit ratings in the ABS and government categories as a credit rating agency on a continuous basis since 1995. None of these statements, says the SEC, were true.
It also alleges that Egan not only provided the false information but failed to avoid conflicts of interest and to comply with recordkeeping requirements. In so doing, the SEC says, Egan violated a laundry list of provisions of the Exchange Act.
H&R Block Subsidiary to Pay $28.2 Million
In the case of the mortgage company, the SEC charged H&R Block subsidiary Option One Mortgage Corp. with misleading investors in several offerings of subprime residential mortgage-backed securities (RMBS) by failing to disclose that its financial condition was significantly deteriorating.