Egan-Jones Ratings expects to receive its designation as a Nationally Recognized Statistical Ratings Organization from the Securities and Exchange Commission within six months, according to Sean Egan, managing director. He bases this optimism on private conversations held between his company and the SEC.
The approval would conclude a process that began in 1998, when Egan-Jones originally submitted its request. Egan said the increasing focus on the rating agencies over the past 12 months as part of a new regulatory effort has improved the prospects for Egan-Jones, which is based in Haverford, Pa.
The approval would mark the second time in recent years that an upstart rating agency has received the coveted NRSRO status. The designation is a must-have for rating agencies since investment vehicles are required to buy assets with ratings from NRSRO-designated agencies. Dominion Bond Rating Services received its NRSRO designation last February. A.M. Best Co., an insurance rating company, is also waiting for its NRSRO designation. John Heine, SEC spokesman, declined comment on which companies might next receive NRSRO designation.
Egan believes his company has an advantage over Moody’s Investors Service and Standard & Poor’s because it is not beholden to issuers for fees and instead charges institutional investors for ratings. Egan pointed out his subscribers can get a jump on credit changes because his company's ratings are disseminated to a limited audience, rather than to the market at large as other rating agencies'. He said even though Egan-Jones is not paid by issuers, this does not affect its ability to obtain information from issuers.
Egan-Jones rates corporates, sovereigns and some collateralized debt obligations on request. The company is looking to make a further push into structured finance, although Egan declined to specify which areas. The rating agency is also looking to add an analyst to its existing group of 14 in the next month. The new recruit would report to Egan and be part of the company's ongoing expansion, although he declined to specify a timeframe for the expansion or a size goal.
