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SEC Net Capital Rule 15c3-1 training course

The Securities and Exchange Commission has 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.

“If adopted, [these rules] 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,” Gensler said.

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.

SEC said, 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 confirmed it was withdrawing these previously proposed rules.

The proposing release will be published on and in the Federal Register. Per usual practice, 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.