Egan-Jones Comments on SEC Order Denying Its Application for Exemptive Relief

NEW YORK, March 24, 2026 /PRNewswire/ -- Egan-Jones Ratings Company commented on a March 23, 2026, Order ("Order") issued by the Securities and Exchange Commission ("SEC") denying Egan-Jones' application for a temporary exemption from an SEC rule that places a limit on the amount of business a rating agency may receive in one year from a particular client. SEC Rule 17g-5 prohibits an NRSRO from issuing or maintaining a credit rating solicited by a person that, in the most recently ended fiscal year, provided the NRSRO with net revenue equaling or exceeding 10% of the total net revenue of the NRSRO for that fiscal year. The SEC's Order denied Egan-Jones' application for a temporary exemption from the Rule, stating that the Commission was unable to conclude that the requested relief is necessary or appropriate in the public interest, and consistent with the protection of investors, despite the overage being a one-time, unanticipated request.

Sean Egan, founder and CEO of Egan-Jones, stated, "We disagree strongly with the SEC's conclusion and the artificial distinctions it attempts to draw from previously granted examples of similar exemptive relief. The distinctions the SEC draws ignore altogether the fact that a majority of Egan-Jones' business is for clients who are investors, not the companies themselves that pay for the rating of their own securities. When investors pay, which is the Egan-Jones model, there are fewer conflicts. When the issuers pay, which is the overwhelming majority model, the notion that such ratings are 'independent' is less likely. Sadly, the SEC's decision only has the effect of stifling increased competition."

The SEC Rule at issue effectively prohibits a user of ratings from obtaining a rating from its preferred rating agency if that user accounts for more than 10% of the rating agency's revenue, even if the overage is a one-time event. At issue is a November 2025 request by an Egan-Jones client that Egan-Jones issue an unexpected number of ratings late in 2025. The effect of the issuance of the requested ratings, given the size of Egan-Jones, would have caused Egan-Jones to exceed the regulatory 10% threshold. The one-time exemptive request simply was about enabling Egan-Jones to service an existing client with a never-before-presented need, consistent with a stated purpose of the Credit Rating Agency Reform Act of 2006, to promote competition as in the public interest.¹

Granting a small, one-time exemption would have been both meaningful to Egan-Jones, a small NRSRO, consistent with prior Commission practice, and beneficial to the marketplace, particularly in terms of competitiveness. The intent of what the industry refers to as "the 10% Rule" is to regulate potential conflicts by rating agencies. The Egan-Jones exemption application was from a small ratings agency that accounts for 0.67% of all ratings based on actual dollar amounts of the items rated in the credit rating market.² 

By definition, as a small firm, Egan-Jones' business naturally is more concentrated than that of larger NRSROs.

The SEC's denial of the nominal exemption request is inconsistent with past positions of the SEC. In granting prior exemptions, the SEC has stated expressly that it wanted to recognize and level the fact that "smaller firms [are] more likely to be affected by the rule."  Had the SEC granted the requested exemption, then the SEC clearly would have, in the SEC's words, "increased competition that would result from the exemption." 

Exemptions to the 10% Rule for firms like Egan-Jones are critical to the continued viability and success of small firms and the competitiveness of ratings. Egan-Jones takes very seriously exemption requests and the timing of such requests to adhere to SEC rules, reflecting the care with which Egan-Jones tracks its compliance with all SEC rules, including Rule 17g-5(c)(1). Unique circumstances alone gave rise to the business and the necessary request.

Mr. Egan added, "It is inherently anti-competitive not to allow smaller firms small temporary exemptions from the Rule, particularly when it would take Egan-Jones still below 15% for one client in only one year."

About Egan-Jones Ratings
Egan-Jones, an NRSRO founded in 1995, offers timely and accurate credit ratings and proxy services.

Media Contact for this Release:
Debra DeShong
[email protected]

¹ "[T]the 2 largest credit rating agencies serve the vast majority of the market, and additional competition is in the public interest." Pub. Law 109-291 at sec. 2(5) (Sept. 29, 2006) (viewed at https://www.sec.gov/divisions/marketreg/ratingagency/cra-reform-act-2006.pdf).
² Based on the SEC OCR Staff Report of Nationally Recognized Statistical Rating Organizations issued in January 2025.

SOURCE Egan-Jones Ratings Company