The SEC has proposed new rules to enhance conditions regarding governance throughout all registered clearing agencies by decreasing the probability that conflicts of interest may impact the board of directors or another governing body of a registered clearing agency.
Clearing agencies that are registered with the SEC contribute significantly to the securities markets. They facilitate timely and precise clearance and settlement of securities transactions, including the transfer of record ownership and the protection of securities and related funds. The latter safeguards investors and individuals facilitating transactions by and on behalf of investors.
The new rules are designed to:
identify specific responsibilities of the board
enhance transparency into board governance
improve the alignment of incentives among owners and participants of a registered clearing agency
Further, should the proposed rules be approved, the implemented changes would:
require policies and procedures to solicit, consider, and document the registered clearing agency’s consideration of the views of its participants and other relevant stakeholders regarding material developments in its governance and operations
require policies and procedures that allow the board to regulate relationships with service providers for essential services
require policies and procedures that identify, mitigate or eliminate, and document the identification, mitigation or elimination of conflicts of interest
require policies and procedures that require directors to report potential conflicts promptly
establish requirements for a risk management committee, including its composition and reconstitution
establish requirements for a nominating committee, including its fitness standards for serving on the board, and a documented process for evaluating board nominees
establish independent director requirements for the composition of certain other board committees and determine circumstances that would preclude a director from being an independent director
define independence in the context of a director serving on the board of a registered clearing agency and require that a majority of the board (34 percent) be independent directors, if a majority of the voting rights are directly or indirectly held by participants
The public may submit feedback during the comment period for the proposal, which will remain open for 60 days following its publication on the SEC’s website or 30 days following its publication in the Federal Register, whichever period is longer.