The US Securities and Exchange Commission has rejected Egan-Jones Ratings Company's attempt to re-register as a Nationally Recognized Statistical Rating Organization (NRSRO) for asset-backed securities (ABS) and various government debt categories, citing inaccuracies in the firm's application regarding when it began rating certain securities.

The denial, issued on August 12, 2026, comes seven months after Egan-Jones submitted its re-registration application in January 2026. It represents the continuation of a regulatory dispute spanning more than a decade and highlights the heightened scrutiny the SEC applies to credit rating agencies — particularly in the ABS space — following the 2008 financial crisis, when major raters were widely criticized for assigning overly favorable grades to mortgage-backed securities that deteriorated rapidly.

Application Discrepancies

The SEC's rejection hinged on two primary concerns. First, the commission identified conflicting Qualified Institutional Buyer certifications submitted by Egan-Jones. These certifications asserted that the firm had been issuing ABS ratings since December 2019 and March 2020. However, the SEC determined that Egan-Jones did not actually begin continuous ABS ratings until mid-2020.

Second, a separate SEC order dated March 23, 2026 raised broader questions about whether Egan-Jones possesses the financial and managerial resources required to maintain the integrity of its credit ratings.

History of Regulatory Issues

This is not the first time Egan-Jones has faced SEC scrutiny over application accuracy. In 2013, the firm lost its NRSRO registration for asset-backed and government securities after the commission identified material misstatements in its original applications. The 2013 enforcement action also involved founder Sean Egan, who remains subject to an association bar stemming from prior misconduct.

Egan-Jones continues to hold NRSRO status for other asset classes, including corporate debt, insurance company obligations, and financial institution ratings. The government securities and ABS markets, however, remain inaccessible to the firm.

Significance of NRSRO Designation

The NRSRO designation serves as a critical gatekeeper credential in the US financial system. Many institutional investors, pension funds, and regulated financial entities are required by statute or internal policy to rely on NRSRO-issued ratings when making investment decisions. Without the designation for a specific asset class, a ratings agency cannot effectively serve a substantial portion of the market.

The Dodd-Frank Act of 2010 expanded the SEC's rulemaking and oversight authority over NRSROs, adding requirements around internal controls, conflicts of interest disclosure, and transparency that have raised compliance costs and heightened the barriers for firms seeking to enter or re-enter specific rating categories.

The US credit ratings industry has long been dominated by S&P Global Ratings, Moody's Investors Service, and Fitch Ratings. Smaller firms such as Egan-Jones, DBRS Morningstar, and Kroll Bond Rating Agency have sought to establish niche positions, but regulatory barriers to entry and re-entry remain significant.

Source: CryptoBriefing