The Clearing Corporation will pay $20 million to the US as penalties, following a Securities and Exchange Commission investigation finding the company failed to implement policies to manage certain risks as required by U.S. laws and SEC and CFTC rules. According to the SEC’s and CFTC’s orders, Chicago-based OCC failed to establish and enforce policies and procedures involving financial risk management, operational requirements, and information-systems security. The SEC’s order also found that OCC changed policies on core risk management issues without obtaining required SEC approval.
As the U.S.’s sole registered clearing agency for exchange-listed option contracts on equities, OCC was designated in 2012 as a systemically important financial market utility, or SIFMU. That designation makes OCC subject to enhanced regulation and transparency regarding its risk management systems because disruption to OCC’s operations might be costly not only for itself and its members, but other market participants or the broader financial system. Today’s enforcement action is the SEC’s first charging violations of SEC clearing agency standards adopted in 2012 and in 2016, and the CFTC’s first charging violations of Core Principles applicable to Derivatives Clearing Organizations.
“As a clearing agency, OCC performs a range of services that are critical to the effective operation of the securities markets,” said SEC Chairman Jay Clayton. “Today’s resolution is intended to ensure that OCC will have appropriate policies and procedures in place to meet its obligations to our financial system.”