Egan-Jones Ratings Co., a credit rating agency, has been sanctioned by the U.S. Securities and Exchange Commission (SEC) for violating conflict of interest requirements.

The SEC charged the rating agency and its CEO, Sean Egan, in connection with alleged violations of conflict-of-interest provisions in the rules regarding the provision of credit ratings.

Specifically, the regulator alleged Egan was involved with a client’s “business and marketing activities” while also participating in the process of determining a credit rating for the client, “which created a prohibited conflict of interest.”

The SEC also found the company violated another conflict of interest requirement by continuing to rate a company that provided more than 10% of revenues for Egan-Jones during the previous fiscal year.

The company and Egan settled the allegations without admitting or denying the SEC’s findings.

Egan-Jones agreed to pay a US$1.7-million penalty and more than US$146,000 in disgorgement and interest; Egan himself agreed to a US$300,000 penalty. The firm also agreed to conduct training and to retain an independent consultant to assess its compliance with conflict of interest rules.

“Credit rating agencies play a vital role in assessing the credit risk of an issuer and must be vigilant in avoiding potential conflicts of interest to promote the integrity, impartiality, and quality of credit ratings,” said Gurbir Grewal, director of the SEC’s enforcement division, in a release.