US’ Securities and Exchange Commission (SEC) has adopted final rules under the Securities Exchange Act of 1934 to improve the governance of all registered clearing agencies. The new rules aim to reduce the likelihood of conflicts of interest that could influence the governing bodies of clearing houses.

In a press release, SEC chair Gary Gensler said that the new legislation seeks to “promote board independence, consider the views of relevant stakeholders, and reduce the potential for conflicts of interest with respect to the board and senior management”.

Under the new rules, the majority of a nominating committee’s members are required to be independent. Members of the risk management committee are also required to be sufficiently qualified according to the standards defined by the rules. In case of a conflict of interest, the CCP has to have policies in place to identify and document the incidents, and procedures to mitigate them.


No risky moves

Regarding risk management, CCPs are now required to reconstitute the membership of their risk management committee annually. According to the SEC, this would give clearing agencies the flexibility to retain valuable members with deep industry expertise year to year, while allowing risk committees to be reconstituted when necessary. In addition, CCPs must have effective consultation mechanisms in place that allow them to receive and act on feedback from relevant stakeholders.

CCPs have 12 months after the adopting release is published in the Federal Register to comply with all aspects of the rules except for the independence requirements for the board and board committees – compliance for that is 24 months.