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SEC Proposes Rules to Improve Clearing Agency Governance and to Mitigate Conflicts of Interest
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SEC Proposes Rules to Improve Clearing Agency Governance and to Mitigate Conflicts of Interest

Aug. 8, 2022 – The Securities and Exchange Commission today proposed new rules to help improve governance arrangements across all registered clearing agencies by reducing the likelihood that conflicts of interest may influence the board of directors or equivalent governing body of a registered clearing agency.

“I was pleased to support this proposal because, if adopted, it would enhance governance standards for all registered clearinghouses, particularly with regards to conflicts of interest,” said SEC Chair Gary Gensler. “I think these rules would help to build more transparent and reliable clearinghouses. This in turn would help ensure our markets are more resilient, protecting investors and building trust in our markets.”

The proposed rule would establish new governance requirements on board composition, independent directors, nominating committees, and risk management committees. The proposed rule would also require new policies and procedures regarding conflicts of interest, board obligations to oversee relationships with service providers for critical services, and a board obligation to consider stakeholder viewpoints. As it relates to clearing agencies that clear security-based swaps, the proposed rule would advance the policy objectives of the Dodd-Frank Act by establishing new requirements for policies and procedures that require such clearing agencies to identify, mitigate, or eliminate conflicts of interest and document those actions.

If adopted, the proposed rules would increase transparency of the decision-making process on clearing agency boards and committees and improve the alignment of incentives between clearing agency participants and owners. In particular, the proposed rule would reduce conflicts of interest, increase the role of independent directors in board decision-making processes, and help promote fair representation of owners and participants in the selection of directors.

The Commission previously proposed, but did not adopt, rules regarding clearing agency governance in two separate releases between 2010 and 2011: proposed Regulation MC, proposed Rule 17Ad-25, and proposed Rule 17Ad-26. Given the multiple changes that the Commission has made to its regulatory framework for clearing agencies in the interim, the Commission is withdrawing these previously proposed rules.

The proposing release will be published on SEC.gov and in the Federal Register. The public comment period will remain open for 60 days following publication of the proposing release on the SEC’s website or 30 days following publication of the proposing release in the Federal Register, whichever period is longer.

Read the Full Press Release


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Securities Attorney at Sallah Astarita & Cox | 212-509-6544 | mja@sallahlaw.com | Website | + posts

Mark Astarita is a nationally recognized securities attorney, who represents investors, financial professionals and firms in securities litigation, arbitration and regulatory matters, including SEC and FINRA investigations and enforcement proceedings.

He is a partner in the national securities law firm Sallah Astarita & Cox, LLC, and the founder of The Securities Law Home Page - SECLaw.com, which was one of the first legal topic sites on the Internet. It went online in 1995 and is updated daily with news, commentary and securities law related links.

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