Self-Regulatory Organizations; The Options Clearing Corporation; Notice of Filing of Proposed Rule Change Concerning Charters for the Board of Directors, the Membership/Risk Committee, the Audit Committee and the Performance Committee, 65027-65030 [2013-25646]
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Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–70753; File No. SR–OCC–
2013–17]
Self-Regulatory Organizations; The
Options Clearing Corporation; Notice
of Filing of Proposed Rule Change
Concerning Charters for the Board of
Directors, the Membership/Risk
Committee, the Audit Committee and
the Performance Committee
October 24, 2013.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’)1 and Rule 19b–4 thereunder,2
notice is hereby given that, on October
17, 2013, the Options Clearing
Corporation (‘‘OCC’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by OCC. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Clearing Agency’s Statement of the
Terms of Substance of the Proposed
Rule Change
This proposed rule change concerns
the charters of OCC’s Board of Directors
(‘‘Board Charter’’) and the Membership/
Risk Committee (‘‘MRC Charter’’), Audit
Committee (‘‘AC Charter’’) and
Performance Committee (‘‘PC Charter’’)
of OCC’s Board of Directors
(collectively, the ‘‘Committee
Charters’’).3
II. Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
In its filing with the Commission,
OCC included statements concerning
the purpose of and basis for the
proposed rule change and discussed any
comments it received on the proposed
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 The Board Charter was adopted by the Board of
Directors on March 7, 2013. Prior versions existed
of the MRC Charter, AC Charter and PC Charter.
Each of these Committee Charters were reviewed
and amended in 2012 with the MRC Charter being
further amended in 2013. The 2013 amendment
provided that a Public Director would Chair the
Membership/Risk Committee. See Securities
Exchange Act Release No. 70486 (September 24,
2013), 78 FR 59994 (September 30, 2013) (SR–OCC–
2013–12). OCC has not previously submitted the
Board Committee Charters as rule changes pursuant
to Section 19(b) of the Exchange Act, 15 U.S.C.
78s(b), and Rule 19b–4 thereunder, 17 CFR
240.19b–4, but is now doing so in light of recently
provided guidance by the Commission’s staff. Since
none of these Charters have been the subject of
prior rule filings, the key terms of each Charter, as
most recently approved by the Board, are described
in more detail below in Item 3.
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rule change. The text of these statements
may be examined at the places specified
in Item IV below. OCC has prepared
summaries, set forth in sections (A), (B)
and (C) below, of the most significant
aspects of these statements.
(A) Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
1. Purpose of the Proposed Rule Change
This proposed rule change concerns
the Board, Membership/Risk Committee
(‘‘MRC’’), Audit Committee (‘‘AC’’) and
Performance Committee (‘‘PC’’)
Charters.
Board of Directors Charter
The introduction of the Board Charter
reconfirms that oversight of the
management of the business and affairs
of OCC is generally vested in the Board.
OCC has not previously adopted a
charter for its Board of Directors
(‘‘Board’’) because OCC’s By-Laws and
Rules provide the framework within
which the respective responsibilities of
OCC’s Board and management have
been defined. The Board Charter does
not impose any new responsibilities on
the Board, but rather reflects the
longstanding powers and duties of the
Board, as well as underlying practices
that have been developed to aid the
Board in meeting its obligations. The
Board’s adoption of a Charter at this
time reflects a desire to increase the
transparency of the Board’s oversight
activities for parties outside of OCC,
promote accountability, and to align
with corporate governance best
practices.
The Board Charter would also
acknowledge certain parameters
applicable to the membership in and
organization of the Board, many of
which are separately provided for in
OCC’s By-Laws.4 The Board Charter
would reflect that the size and
composition of the Board and
qualification standards used in the
selection of Directors would be
consistent with the corresponding terms
of the By-Laws. Actions concerning the
election, resignation, and
disqualification of Directors, and with
respect to the tenure of service of each
category of Director, would be required
to be taken in accordance with the ByLaws. The Management Director 5 and
4 The Board Charter contains cross-references to
such applicable provisions of OCC’s By-Laws. For
ease of readability, those cross-references have not
been repeated in this Item 3.
5 Pursuant to a recent OCC rule change that has
been approved by the Commission, but not yet
implemented by OCC, the office of Chairman of
OCC will be split into two offices, Executive
Chairman and President. Each of the Executive
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65027
Exchange Directors would be required
to be elected at each annual stockholder
meeting and term limits and the absence
of age limits for Directors would be
addressed along with responsibilities of
any Management or Member Vice
Chairman.
The Board Charter would address
certain aspects of the membership and
organization of the Board with respect
to meetings. The Board would meet a
minimum of five times each year with
special meetings called pursuant to the
By-Laws.6 Expectations concerning
participation in meetings by Directors
would be set out and the Chairman of
the Board would be required to set the
agenda in consultation with the
President and the Secretary.
The Board Charter would provide that
the Board is authorized to make
inquiries as it deems appropriate in the
execution of its duties and may confer
with OCC management or employees.7
The Board would elect certain corporate
officers annually, as provided for in the
By-Laws.
The Board would be permitted to
form such committees and
subcommittees as it deems appropriate
and delegate authority to committee
members.8 Chairs of the Board
committees would be determined in
accordance with the terms of the
applicable committee charter and any
applicable provisions of the By-Laws.
Committee assignments would be
annually reviewed and approved by the
Board subject to the By-Laws.
Consistent with the requirements
applicable to the Directors serving on
the Board, Directors on Board
committees would be expected to meet
certain standards of preparation and
participation.
As a more detailed expression of the
Board’s responsibility to act as a
steward of OCC and ensure it has the
critical capabilities to achieve its
obligations in a safe, sound, efficient
and prudential manner, the Board
Charter would identify specific
Chairman and the President will be elected as
Management Directors by the stockholders at each
annual stockholder meeting. See File No. SR–OCC–
2013–09, 78 FR 47449 (Aug. 5, 2013).
6 The Chairman would be permitted to ask OCC
management or others to attend meetings and to
provide pertinent information and the Board would
be permitted to call executive sessions from which
OCC management may be excluded. A majority of
the Directors then in office, but not fewer than six
Directors, would constitute a quorum for the
conduct of business of the Board.
7 The Board Charter would provide that in
discharging its oversight role the Board may hire
specialists or rely on outside advisors or specialists
and that it would have the authority to approve
related fees and terms of retention.
8 The Board would be required to establish a
written charter for each committee.
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Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Notices
functions and responsibilities of the
Board.9 The Board Charter would also
note that certain functions and
responsibilities of the Board are set forth
separately in the By-Laws 10 and that
each Director must act in good faith in
the best interests of OCC and with due
regard for the fiduciary responsibilities
owed to OCC. Each Director would also
be required to comply with certain
conduct requirements.
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Committee Charters
OCC has long maintained Charters for
the MRC, AC and PC (each, a
‘‘Committee,’’ and collectively, the
‘‘Committees’’). Below is a discussion of
the provisions common across all the
Committee Charters, followed by a
discussion of each Committee Charter’s
unique provisions.
The purpose of the Committee
Charters is to describe the role each
Committee plays in assisting the Board
in fulfilling its responsibilities, as
described in OCC’s By-Laws and Rules,
as well as specify the policies and
procedures governing the membership
and organization, scope of authority,
and specific functions and
responsibilities of each Committee. The
guidelines for the composition of each
Committee, as well as the policies
regarding its meeting schedules, quorum
rules, minute-keeping and reporting
requirements, are set forth in each
charter and conform to applicable
requirements specified in OCC’s ByLaws and Rules. Each Committee,
subject to the direction of the Board, is
authorized to act on behalf of the Board
with respect to any matter necessary or
appropriate to accomplish the purpose
9 These include the responsibility to oversee:
OCC’s governance processes in a manner consistent
with the Board Charter; processes and framework
for assessing, managing and monitoring strategic,
financial and operational risk; financial reporting,
auditing, accounting and compliance processes; a
system of internal controls; major capital
expenditures; the development and design of
employee compensation, incentive and benefit
programs; and compensation of the Chairman and
the President. The Board Charter would also
specifically require the Board to approve and
oversee OCC’s business strategies, monitor
performance in delivering clearance and settlement
services; foster OCC’s processes designed to ensure
compliance with applicable laws and regulations
and conduct business in a legal and ethical manner;
assure management succession; and approve OCC’s
annual budget and corporate plan.
10 The Charter would identify the Board’s
responsibility under the By-Laws to approve
applications for clearing membership and initial
contributions to the clearing fund, OCC’s fee
structure as well as rebates, discounts and refunds
of clearing fees, and modifications of OCC’s ByLaws and Rules. The Board Charter would also
identify the responsibility of the Board to determine
disqualifications from Board service and fill
vacancies, elect corporate officers, conduct hearings
in connection with a denial or suspension of
membership; and suspend a clearing member.
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and responsibilities set forth in its
Charter, and is authorized to further
delegate this authority to various
subcommittees that it may form. Each
Committee is authorized to make
inquiries into any matter related to its
respective purpose and
responsibilities 11 and to confer with
OCC’s management and other
employees as it deems appropriate.
Additionally, the chair of each
Committee would be authorized to act
on behalf of its respective Committee in
the case that immediate action is
required, and it is impractical to
convene such Committee.12
While each Committee Charter sets
forth its own Committee composition
requirements, each requires the
inclusion of at least one Public Director
and empowers the Board to remove or
replace any Committee member at any
time.
Each Committee Charter sets forth its
own meeting schedule, though each
empowers its respective chairman to
call additional meetings as
circumstances dictate. Each Committee
Charter specifies that the agenda for
each Committee’s meetings would be
established by the chairman of the
Committee, or its designee, in
consultation with the Secretary and
OCC’s management. A majority of the
members would constitute a quorum,
and if the chairman is not present at a
meeting the members who are present
would designate a member to act as the
chairman. All Committees are permitted
to call executive sessions from which
guests of such Committee may be
excluded, and Committee members are
permitted to participate in all meetings
by conference telephone call or other
means of communication that permit all
meeting participants to hear each
other.13
Each Committee Charter requires the
relevant Committee to review its
respective charter annually, with each
charter submitted to OCC’s Board for
reapproval with any such changes that
the relevant Committee deems
advisable.
The discussion that follows
summarizes the key charter provisions
associated with the specific functions of
the MRC, AC and PC, respectively.
11 The Committee Charters further permit each
Committee to hire specialists or rely on outside
advisors or specialists to assist in carrying out the
Committee’s activities and confirm the Committee’s
authority to approve any related terms of retention
and fees. The MRC and PC’s authority under these
provisions, however, is subject to Board approval.
12 In such instances, the committee chair must, as
soon as practicable, report any actions taken to its
committee for its ratification.
13 Meeting minutes would be required to be kept
and circulated with the Board.
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The MRC Charter
The MRC Charter sets forth the MRC’s
purpose as overseeing OCC’s policies
and processes for identifying,
addressing and reporting on strategic,
operational and financial risk as well as
OCC’s enterprise risk management
framework, among other duties, as well
as performing those functions delegated
to it in OCC’s By-Laws and Rules.14 In
addition, the MRC Charter clarifies that
it is the MRC’s responsibility to review
periodic reports from OCC’s enterprise
risk management program and to review
and assess that program annually, and
that the MRC must provide a report to
the Board of Directors on an annual
basis that summarizes its activities
during the past year.15
The MRC Charter requires the MRC to
be composed of OCC’s Chairman,
Member Vice Chairman, and three or
more other Member Directors appointed
annually by the Board. The MRC is to
be chaired by a Public Director. The
MRC Charter requires the MRC to meet
at least seven times a year.
The MRC Charter sets forth certain
responsibilities and functions for the
MRC, including but not limited to, the
following: reviewing and approving or
disapproving certain requests from
clearing members, including proposals
to become managed clearing members,
to expand clearing activities to include
additional account types or products,
and to participate in stock loan
programs; periodically reviewing OCC’s
initial and ongoing membership
requirements and standards;
periodically reviewing and
recommending modifications to the
inputs to OCC’s margin formula, the
methodologies behind margin and
clearing fund requirements, the lists of
approved classes of GSE debt securities
for margin deposits, and the applicable
haircuts for margin; modifying margin
requirements; reviewing the adequacy
and efficacy of and recommending
modifications to OCC’s contingency
plans for clearing member failures;
periodically reviewing clearing member
surveillance standards, and reviewing
and advising management with respect
to such surveillance; periodically
reviewing and assessing, and reviewing
reports from, OCC’s enterprise risk
management program; and performing
14 This oversight by the MRC includes, but is not
limited to, review of material policies and processes
concerning: membership criteria and financial
safeguards; member and other counterparty risk
exposure assessments; liquidity requirements and
maintenance of financial resources; risk modeling
and assessments; and default management
planning.
15 The MRC may make other reports to the Board
of Directors as it deems appropriate.
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such other functions specified in OCC’s
By-Laws and Rules or delegated to it by
the Board.
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The AC Charter
The AC Charter sets forth the purpose
of the AC as assisting the Board in
fulfilling its oversight responsibilities,
by serving as an independent and
objective party to oversee OCC’s
financial reporting process, system of
internal control, and auditing,
accounting and compliance
environment and processes. The AC’s
purpose also includes overseeing the
audit efforts of OCC’s independent
accountants and the internal audit
department, as well as facilitating open
communication among the independent
accountants, financial and senior
management, internal audit department,
compliance department and the Board.
The AC Charter requires that the AC
be composed of three or more directors
appointed annually by the Board, each
of whom must have a working
familiarity with basic finance and
accounting practices. At least one
member, if possible, is required to have
accounting or related financial
management expertise. The Board is
permitted to appoint a Chair of the AC,
though in the absence of a Board
appointment, the AC should appoint a
Chairman by majority vote of the full
AC membership. The AC Charter
requires the AC to meet at least four
times a year.
The AC Charter also assigns specific
activities to the AC, including, but not
limited to, the following: appointing,
overseeing and reviewing OCC’s
independent accountants, and all fees
paid to them; reviewing the annual
audit plan, annual internal control
attestation engagement, and the annual
audited financial statements and related
reports; approve any decision of OCC’s
management to appoint or replace the
Chief Compliance Officer; reviewing
and approving the Compliance Charter;
assessing the performance and
effectiveness of the compliance
program; reviewing and evaluating any
annual compliance report that may as a
matter of regulation be certified by the
Chief Compliance Officer; reviewing
remediation tracking performed by
OCC’s compliance department in
connection with regulatory inspection
reports and management’s response;
reviewing OCC’s system to
communicate and monitor compliance
with and enforcement of OCC’s Code of
Conduct and the outcome of
disciplinary actions taken by OCC; and
establishing ‘‘whistleblower’’
procedures for the reporting by
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personnel of any concerns regarding
unethical or illegal conduct.
The PC Charter
The PC Charter sets forth the PC’s
purpose as assisting the Board in
oversight of OCC’s overall performance
in promptly and accurately delivering
clearance, settlement and other
designated industry services and in the
accomplishment of other periodicallyestablished corporate goals and
objectives given OCC’s systemically
important status. The PC is also tasked
with recommending compensation for
certain OCC officers and reviewing and
approving the structure and design of
employee compensation, incentive and
benefit programs.
The PC Charter requires that the PC be
composed of OCC’s Chairman, Member
Vice Chairman and three or more other
directors appointed annually by the
Board, and that the PC be chaired by
OCC’s Member Vice Chairman. The PC
Charter states that the PC will generally
meet in advance of each regularly
scheduled Board meeting.
The PC Charter describes the PC’s role
as one of oversight, including oversight
of management’s responsibility to
identify, organize, and manage the
operational, systems, technology,
financial, human, and other resources
necessary to support OCC’s clearance,
settlement and other business activities.
The PC Charter sets forth additional
functions and responsibilities including,
but not limited to, the following:
regularly scheduled reviews of OCC’s
Corporate Plan, Budget, executive
performance and compensation,
employment contracts, changes in
OCC’s fee structure, and special
financial matters; oversight of the
administration of OCC’s various
incentive, bonus, deferred
compensation, retirement and welfare
plans; periodic assessment of succession
plans for key executives; oversight of
the compensation, benefits and
perquisites of OCC’s executive and
management personnel, provided that
decisions with respect to the individual
compensation of the Chairman,
Management Vice Chairman, and
President shall be made in the form of
recommendations to the Board; and any
other activities that are consistent with
the PC Charter, as the PC or the Board
may deem necessary or appropriate.
2. Statutory Basis for the Proposed Rule
Change
OCC believes that the proposed rule
change is consistent with Section
17A(b)(3)(F) of the Act 16 because the
Board Charter and Committee Charters
will help ensure that OCC’s governance
structure is designed to protect investors
and the public interest. By creating a
Board Charter and making certain
amendments to the MRC Charter, AC
Charter and PC Charter that clarify the
duties and operations of the Board and
its Committees OCC will have, as
required under Rule 17Ad–22(d)(8),17 a
clear and transparent governance
structure that will fulfill the public
interests requirements in Section 17A of
the Act, support the objectives of OCC’s
owners and participants, and promote
the effectiveness of OCC’s risk
management procedures.
(B) Clearing Agency’s Statement on
Burden on Competition
OCC does not believe that the
proposed rule change would impose any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.18 This
proposed rule change will help ensure
that OCC meets regulatory requirements
that it has a clear and transparent
governance structure, as well as clarify
the organization, duties and operation of
its Board and Committee, through the
adoption of the Board Charter and
updated Committee Charters. To the
extent OCC’s clearing members are
affected by proposed rule change, OCC
believes that, by clarifying and
publishing the terms of the Board and
Committee Charters in the public
domain, all of its participants will have
greater certainty concerning OCC’s
governance arrangements and that such
clarification will facilitate the prompt
and accurate settlement of securities
transactions. Accordingly, OCC does not
believe that the proposed rule will it
impose any burden on competition that
is not necessary or appropriate in
furtherance of the purposes of the Act.
(C) Clearing Agency’s Statement on
Comments on the Proposed Rule
Change Received From Members,
Participants or Others
Written comments on the proposed
rule change were not and are not
intended to be solicited with respect to
the proposed rule change and none have
been received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period
up to 90 days (i) as the Commission may
17 17
16 15
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U.S.C. 78q–1(b)(3)(F).
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65029
18 15
E:\FR\FM\30OCN1.SGM
CFR 240.17Ad–22(d)(8).
U.S.C. 78q–1(b)(3)(I).
30OCN1
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Federal Register / Vol. 78, No. 210 / Wednesday, October 30, 2013 / Notices
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the self-regulatory organization
consents, the Commission will:
(A) by order approve or disapprove
the proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
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Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml), or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
OCC–2013–17 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street NE., Washington DC
20549–1090.
All submissions should refer to File
Number SR–OCC–2013–17. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method of submission. The
Commission will post all comments on
the Commission’s Internet Web site
(https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room located at 100 F Street
NE., Washington, DC 20549–1090 on
official business days between the hours
of 10:00 a.m. and 3:00 p.m. Copies of
such filing also will be available for
inspection and copying at the principal
office of OCC and on OCC’s Web site at
https://www.optionsclearing.com/
components/docs/legal/rules_and_
bylaws/sr_occ_13_17.pdf. All comments
received will be posted without change;
the Commission does not edit personal
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Jkt 232001
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–OCC–
2013–17 and should be submitted on or
before November 20, 2013.
For the Commission by the Division of
Trading and Markets, pursuant to delegated
authority.19
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–25646 Filed 10–29–13; 8:45 am]
BILLING CODE 8011–01–P
DEPARTMENT OF STATE
[Public Notice 8510]
Department of State Performance
Review Board Members
In accordance with section 4314(c)(4)
of 5 United States Code, the Department
of State has appointed the following
individuals to the Department of State
Performance Review Board for Senior
Executive Service members:
Robert Goldberg, Chairperson, Director,
Office of the United States Foreign
Assistance Resources, Department of
State;
Linda Jacobson, Assistant Legal
Advisor, Office of the Legal Advisor,
Department of State;
Margaret Pollack, Office Director,
Bureau of Population, Refugees and
Migration, Department of State; and
Teddy Taylor, Diplomat in Residence,
Bureau of Human Resources,
Department of State.
Dated: October 21, 2013.
Hans Klemm,
Acting Director General of the Foreign Service
and Director of Human Resources,
Department of State.
[FR Doc. 2013–25755 Filed 10–29–13; 8:45 am]
BILLING CODE 4710–15–P
DEPARTMENT OF TRANSPORTATION
[Docket No. MARAD–4910–81–P]
Agency Requests for Renewal of a
Previously Approved Information
Collection(s): Approval of Underwriters
of Marine Hull Insurance
Maritime Administration.
Notice and request for
comments.
AGENCY:
ACTION:
The Department of
Transportation (DOT) invites public
comments about our intention to request
SUMMARY:
19 17
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CFR 200.30–3(a)(12).
Frm 00124
Fmt 4703
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the Office of Management and Budget
(OMB) approval to renew an
information collection. We are required
to publish this notice in the Federal
Register by the Paperwork Reduction
Act of 1995, Public Law 104–13.
DATES: Written comments should be
submitted by December 30, 2013.
ADDRESSES: You may submit comments
identified by Docket No. MARAD–
2013–0112 through one of the following
methods:
• Federal eRulemaking Portal: https://
www.regulations.gov. Follow the online
instructions for submitting comments.
• Fax: 1–202–493–2251.
• Mail or Hand Delivery: Docket
Management Facility, U.S. Department
of Transportation, 1200 New Jersey
Avenue SE., West Building, Room W12–
140, Washington, DC 20590, between 9
a.m. and 5 p.m., Monday through
Friday, except on Federal holidays. For
access to the docket to read background
documents or comments received, go to
https://www.regulations.gov.
Note: All comments received will be
posted without change to https://
www.redulations.gov including any personal
information provided.
Privacy Act: Anyone is able to search
the electronic form of all comments
received into any of our dockets by the
name of the individual submitting the
comment (or signing the comment, if
submitted on behalf of an association,
business, labor union, etc.). You may
review DOT’s complete Privacy Act
Statement in the Federal Register
published on April 11, 2000 (Volume
65, Number 70; Pages 19477–78) or you
may visit https://www.regulations.gov.
FOR FURTHER INFORMATION CONTACT:
Michael Yarrington, Chief, Office of
Marine Insurance, Maritime
Administration, U.S. Department of
Transportation, 1200 New Jersey
Avenue SE., Washington, DC 20590.
Copies of this collection can also be
obtained from that office.
SUPPLEMENTARY INFORMATION:
OMB Control Number: 2133–0517.
Title: Approval of Underwriters of
Marine Hull Insurance.
Form Numbers: None.
Type of Review: Renewal of an
information collection.
Summary of Collection of
Information: This collection of
information involves the approval of
marine hull underwriters to insure
Maritime Administration program
vessels. Foreign and domestic
applicants will be required to submit
financial data upon which Maritime
Administration approval would be
based.
E:\FR\FM\30OCN1.SGM
30OCN1
]]>Agencies
[Federal Register Volume 78, Number 210 (Wednesday, October 30, 2013)]
[Notices]
[Pages 65027-65030]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-25646]
[[Page 65027]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-70753; File No. SR-OCC-2013-17]
Self-Regulatory Organizations; The Options Clearing Corporation;
Notice of Filing of Proposed Rule Change Concerning Charters for the
Board of Directors, the Membership/Risk Committee, the Audit Committee
and the Performance Committee
October 24, 2013.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'')\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that,
on October 17, 2013, the Options Clearing Corporation (``OCC'') filed
with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I, II, and III below, which
Items have been prepared by OCC. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
This proposed rule change concerns the charters of OCC's Board of
Directors (``Board Charter'') and the Membership/Risk Committee (``MRC
Charter''), Audit Committee (``AC Charter'') and Performance Committee
(``PC Charter'') of OCC's Board of Directors (collectively, the
``Committee Charters'').\3\
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\3\ The Board Charter was adopted by the Board of Directors on
March 7, 2013. Prior versions existed of the MRC Charter, AC Charter
and PC Charter. Each of these Committee Charters were reviewed and
amended in 2012 with the MRC Charter being further amended in 2013.
The 2013 amendment provided that a Public Director would Chair the
Membership/Risk Committee. See Securities Exchange Act Release No.
70486 (September 24, 2013), 78 FR 59994 (September 30, 2013) (SR-
OCC-2013-12). OCC has not previously submitted the Board Committee
Charters as rule changes pursuant to Section 19(b) of the Exchange
Act, 15 U.S.C. 78s(b), and Rule 19b-4 thereunder, 17 CFR 240.19b-4,
but is now doing so in light of recently provided guidance by the
Commission's staff. Since none of these Charters have been the
subject of prior rule filings, the key terms of each Charter, as
most recently approved by the Board, are described in more detail
below in Item 3.
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II. Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
In its filing with the Commission, OCC included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. OCC has prepared summaries, set forth in sections (A),
(B) and (C) below, of the most significant aspects of these statements.
(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
1. Purpose of the Proposed Rule Change
This proposed rule change concerns the Board, Membership/Risk
Committee (``MRC''), Audit Committee (``AC'') and Performance Committee
(``PC'') Charters.
Board of Directors Charter
The introduction of the Board Charter reconfirms that oversight of
the management of the business and affairs of OCC is generally vested
in the Board. OCC has not previously adopted a charter for its Board of
Directors (``Board'') because OCC's By-Laws and Rules provide the
framework within which the respective responsibilities of OCC's Board
and management have been defined. The Board Charter does not impose any
new responsibilities on the Board, but rather reflects the longstanding
powers and duties of the Board, as well as underlying practices that
have been developed to aid the Board in meeting its obligations. The
Board's adoption of a Charter at this time reflects a desire to
increase the transparency of the Board's oversight activities for
parties outside of OCC, promote accountability, and to align with
corporate governance best practices.
The Board Charter would also acknowledge certain parameters
applicable to the membership in and organization of the Board, many of
which are separately provided for in OCC's By-Laws.\4\ The Board
Charter would reflect that the size and composition of the Board and
qualification standards used in the selection of Directors would be
consistent with the corresponding terms of the By-Laws. Actions
concerning the election, resignation, and disqualification of
Directors, and with respect to the tenure of service of each category
of Director, would be required to be taken in accordance with the By-
Laws. The Management Director \5\ and Exchange Directors would be
required to be elected at each annual stockholder meeting and term
limits and the absence of age limits for Directors would be addressed
along with responsibilities of any Management or Member Vice Chairman.
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\4\ The Board Charter contains cross-references to such
applicable provisions of OCC's By-Laws. For ease of readability,
those cross-references have not been repeated in this Item 3.
\5\ Pursuant to a recent OCC rule change that has been approved
by the Commission, but not yet implemented by OCC, the office of
Chairman of OCC will be split into two offices, Executive Chairman
and President. Each of the Executive Chairman and the President will
be elected as Management Directors by the stockholders at each
annual stockholder meeting. See File No. SR-OCC-2013-09, 78 FR 47449
(Aug. 5, 2013).
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The Board Charter would address certain aspects of the membership
and organization of the Board with respect to meetings. The Board would
meet a minimum of five times each year with special meetings called
pursuant to the By-Laws.\6\ Expectations concerning participation in
meetings by Directors would be set out and the Chairman of the Board
would be required to set the agenda in consultation with the President
and the Secretary.
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\6\ The Chairman would be permitted to ask OCC management or
others to attend meetings and to provide pertinent information and
the Board would be permitted to call executive sessions from which
OCC management may be excluded. A majority of the Directors then in
office, but not fewer than six Directors, would constitute a quorum
for the conduct of business of the Board.
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The Board Charter would provide that the Board is authorized to
make inquiries as it deems appropriate in the execution of its duties
and may confer with OCC management or employees.\7\ The Board would
elect certain corporate officers annually, as provided for in the By-
Laws.
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\7\ The Board Charter would provide that in discharging its
oversight role the Board may hire specialists or rely on outside
advisors or specialists and that it would have the authority to
approve related fees and terms of retention.
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The Board would be permitted to form such committees and
subcommittees as it deems appropriate and delegate authority to
committee members.\8\ Chairs of the Board committees would be
determined in accordance with the terms of the applicable committee
charter and any applicable provisions of the By-Laws. Committee
assignments would be annually reviewed and approved by the Board
subject to the By-Laws. Consistent with the requirements applicable to
the Directors serving on the Board, Directors on Board committees would
be expected to meet certain standards of preparation and participation.
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\8\ The Board would be required to establish a written charter
for each committee.
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As a more detailed expression of the Board's responsibility to act
as a steward of OCC and ensure it has the critical capabilities to
achieve its obligations in a safe, sound, efficient and prudential
manner, the Board Charter would identify specific
[[Page 65028]]
functions and responsibilities of the Board.\9\ The Board Charter would
also note that certain functions and responsibilities of the Board are
set forth separately in the By-Laws \10\ and that each Director must
act in good faith in the best interests of OCC and with due regard for
the fiduciary responsibilities owed to OCC. Each Director would also be
required to comply with certain conduct requirements.
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\9\ These include the responsibility to oversee: OCC's
governance processes in a manner consistent with the Board Charter;
processes and framework for assessing, managing and monitoring
strategic, financial and operational risk; financial reporting,
auditing, accounting and compliance processes; a system of internal
controls; major capital expenditures; the development and design of
employee compensation, incentive and benefit programs; and
compensation of the Chairman and the President. The Board Charter
would also specifically require the Board to approve and oversee
OCC's business strategies, monitor performance in delivering
clearance and settlement services; foster OCC's processes designed
to ensure compliance with applicable laws and regulations and
conduct business in a legal and ethical manner; assure management
succession; and approve OCC's annual budget and corporate plan.
\10\ The Charter would identify the Board's responsibility under
the By-Laws to approve applications for clearing membership and
initial contributions to the clearing fund, OCC's fee structure as
well as rebates, discounts and refunds of clearing fees, and
modifications of OCC's By-Laws and Rules. The Board Charter would
also identify the responsibility of the Board to determine
disqualifications from Board service and fill vacancies, elect
corporate officers, conduct hearings in connection with a denial or
suspension of membership; and suspend a clearing member.
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Committee Charters
OCC has long maintained Charters for the MRC, AC and PC (each, a
``Committee,'' and collectively, the ``Committees''). Below is a
discussion of the provisions common across all the Committee Charters,
followed by a discussion of each Committee Charter's unique provisions.
The purpose of the Committee Charters is to describe the role each
Committee plays in assisting the Board in fulfilling its
responsibilities, as described in OCC's By-Laws and Rules, as well as
specify the policies and procedures governing the membership and
organization, scope of authority, and specific functions and
responsibilities of each Committee. The guidelines for the composition
of each Committee, as well as the policies regarding its meeting
schedules, quorum rules, minute-keeping and reporting requirements, are
set forth in each charter and conform to applicable requirements
specified in OCC's By-Laws and Rules. Each Committee, subject to the
direction of the Board, is authorized to act on behalf of the Board
with respect to any matter necessary or appropriate to accomplish the
purpose and responsibilities set forth in its Charter, and is
authorized to further delegate this authority to various subcommittees
that it may form. Each Committee is authorized to make inquiries into
any matter related to its respective purpose and responsibilities \11\
and to confer with OCC's management and other employees as it deems
appropriate. Additionally, the chair of each Committee would be
authorized to act on behalf of its respective Committee in the case
that immediate action is required, and it is impractical to convene
such Committee.\12\
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\11\ The Committee Charters further permit each Committee to
hire specialists or rely on outside advisors or specialists to
assist in carrying out the Committee's activities and confirm the
Committee's authority to approve any related terms of retention and
fees. The MRC and PC's authority under these provisions, however, is
subject to Board approval.
\12\ In such instances, the committee chair must, as soon as
practicable, report any actions taken to its committee for its
ratification.
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While each Committee Charter sets forth its own Committee
composition requirements, each requires the inclusion of at least one
Public Director and empowers the Board to remove or replace any
Committee member at any time.
Each Committee Charter sets forth its own meeting schedule, though
each empowers its respective chairman to call additional meetings as
circumstances dictate. Each Committee Charter specifies that the agenda
for each Committee's meetings would be established by the chairman of
the Committee, or its designee, in consultation with the Secretary and
OCC's management. A majority of the members would constitute a quorum,
and if the chairman is not present at a meeting the members who are
present would designate a member to act as the chairman. All Committees
are permitted to call executive sessions from which guests of such
Committee may be excluded, and Committee members are permitted to
participate in all meetings by conference telephone call or other means
of communication that permit all meeting participants to hear each
other.\13\
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\13\ Meeting minutes would be required to be kept and circulated
with the Board.
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Each Committee Charter requires the relevant Committee to review
its respective charter annually, with each charter submitted to OCC's
Board for reapproval with any such changes that the relevant Committee
deems advisable.
The discussion that follows summarizes the key charter provisions
associated with the specific functions of the MRC, AC and PC,
respectively.
The MRC Charter
The MRC Charter sets forth the MRC's purpose as overseeing OCC's
policies and processes for identifying, addressing and reporting on
strategic, operational and financial risk as well as OCC's enterprise
risk management framework, among other duties, as well as performing
those functions delegated to it in OCC's By-Laws and Rules.\14\ In
addition, the MRC Charter clarifies that it is the MRC's responsibility
to review periodic reports from OCC's enterprise risk management
program and to review and assess that program annually, and that the
MRC must provide a report to the Board of Directors on an annual basis
that summarizes its activities during the past year.\15\
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\14\ This oversight by the MRC includes, but is not limited to,
review of material policies and processes concerning: membership
criteria and financial safeguards; member and other counterparty
risk exposure assessments; liquidity requirements and maintenance of
financial resources; risk modeling and assessments; and default
management planning.
\15\ The MRC may make other reports to the Board of Directors as
it deems appropriate.
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The MRC Charter requires the MRC to be composed of OCC's Chairman,
Member Vice Chairman, and three or more other Member Directors
appointed annually by the Board. The MRC is to be chaired by a Public
Director. The MRC Charter requires the MRC to meet at least seven times
a year.
The MRC Charter sets forth certain responsibilities and functions
for the MRC, including but not limited to, the following: reviewing and
approving or disapproving certain requests from clearing members,
including proposals to become managed clearing members, to expand
clearing activities to include additional account types or products,
and to participate in stock loan programs; periodically reviewing OCC's
initial and ongoing membership requirements and standards; periodically
reviewing and recommending modifications to the inputs to OCC's margin
formula, the methodologies behind margin and clearing fund
requirements, the lists of approved classes of GSE debt securities for
margin deposits, and the applicable haircuts for margin; modifying
margin requirements; reviewing the adequacy and efficacy of and
recommending modifications to OCC's contingency plans for clearing
member failures; periodically reviewing clearing member surveillance
standards, and reviewing and advising management with respect to such
surveillance; periodically reviewing and assessing, and reviewing
reports from, OCC's enterprise risk management program; and performing
[[Page 65029]]
such other functions specified in OCC's By-Laws and Rules or delegated
to it by the Board.
The AC Charter
The AC Charter sets forth the purpose of the AC as assisting the
Board in fulfilling its oversight responsibilities, by serving as an
independent and objective party to oversee OCC's financial reporting
process, system of internal control, and auditing, accounting and
compliance environment and processes. The AC's purpose also includes
overseeing the audit efforts of OCC's independent accountants and the
internal audit department, as well as facilitating open communication
among the independent accountants, financial and senior management,
internal audit department, compliance department and the Board.
The AC Charter requires that the AC be composed of three or more
directors appointed annually by the Board, each of whom must have a
working familiarity with basic finance and accounting practices. At
least one member, if possible, is required to have accounting or
related financial management expertise. The Board is permitted to
appoint a Chair of the AC, though in the absence of a Board
appointment, the AC should appoint a Chairman by majority vote of the
full AC membership. The AC Charter requires the AC to meet at least
four times a year.
The AC Charter also assigns specific activities to the AC,
including, but not limited to, the following: appointing, overseeing
and reviewing OCC's independent accountants, and all fees paid to them;
reviewing the annual audit plan, annual internal control attestation
engagement, and the annual audited financial statements and related
reports; approve any decision of OCC's management to appoint or replace
the Chief Compliance Officer; reviewing and approving the Compliance
Charter; assessing the performance and effectiveness of the compliance
program; reviewing and evaluating any annual compliance report that may
as a matter of regulation be certified by the Chief Compliance Officer;
reviewing remediation tracking performed by OCC's compliance department
in connection with regulatory inspection reports and management's
response; reviewing OCC's system to communicate and monitor compliance
with and enforcement of OCC's Code of Conduct and the outcome of
disciplinary actions taken by OCC; and establishing ``whistleblower''
procedures for the reporting by personnel of any concerns regarding
unethical or illegal conduct.
The PC Charter
The PC Charter sets forth the PC's purpose as assisting the Board
in oversight of OCC's overall performance in promptly and accurately
delivering clearance, settlement and other designated industry services
and in the accomplishment of other periodically-established corporate
goals and objectives given OCC's systemically important status. The PC
is also tasked with recommending compensation for certain OCC officers
and reviewing and approving the structure and design of employee
compensation, incentive and benefit programs.
The PC Charter requires that the PC be composed of OCC's Chairman,
Member Vice Chairman and three or more other directors appointed
annually by the Board, and that the PC be chaired by OCC's Member Vice
Chairman. The PC Charter states that the PC will generally meet in
advance of each regularly scheduled Board meeting.
The PC Charter describes the PC's role as one of oversight,
including oversight of management's responsibility to identify,
organize, and manage the operational, systems, technology, financial,
human, and other resources necessary to support OCC's clearance,
settlement and other business activities. The PC Charter sets forth
additional functions and responsibilities including, but not limited
to, the following: regularly scheduled reviews of OCC's Corporate Plan,
Budget, executive performance and compensation, employment contracts,
changes in OCC's fee structure, and special financial matters;
oversight of the administration of OCC's various incentive, bonus,
deferred compensation, retirement and welfare plans; periodic
assessment of succession plans for key executives; oversight of the
compensation, benefits and perquisites of OCC's executive and
management personnel, provided that decisions with respect to the
individual compensation of the Chairman, Management Vice Chairman, and
President shall be made in the form of recommendations to the Board;
and any other activities that are consistent with the PC Charter, as
the PC or the Board may deem necessary or appropriate.
2. Statutory Basis for the Proposed Rule Change
OCC believes that the proposed rule change is consistent with
Section 17A(b)(3)(F) of the Act \16\ because the Board Charter and
Committee Charters will help ensure that OCC's governance structure is
designed to protect investors and the public interest. By creating a
Board Charter and making certain amendments to the MRC Charter, AC
Charter and PC Charter that clarify the duties and operations of the
Board and its Committees OCC will have, as required under Rule 17Ad-
22(d)(8),\17\ a clear and transparent governance structure that will
fulfill the public interests requirements in Section 17A of the Act,
support the objectives of OCC's owners and participants, and promote
the effectiveness of OCC's risk management procedures.
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\16\ 15 U.S.C. 78q-1(b)(3)(F).
\17\ 17 CFR 240.17Ad-22(d)(8).
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(B) Clearing Agency's Statement on Burden on Competition
OCC does not believe that the proposed rule change would impose any
burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act.\18\ This proposed rule change
will help ensure that OCC meets regulatory requirements that it has a
clear and transparent governance structure, as well as clarify the
organization, duties and operation of its Board and Committee, through
the adoption of the Board Charter and updated Committee Charters. To
the extent OCC's clearing members are affected by proposed rule change,
OCC believes that, by clarifying and publishing the terms of the Board
and Committee Charters in the public domain, all of its participants
will have greater certainty concerning OCC's governance arrangements
and that such clarification will facilitate the prompt and accurate
settlement of securities transactions. Accordingly, OCC does not
believe that the proposed rule will it impose any burden on competition
that is not necessary or appropriate in furtherance of the purposes of
the Act.
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\18\ 15 U.S.C. 78q-1(b)(3)(I).
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(C) Clearing Agency's Statement on Comments on the Proposed Rule
Change Received From Members, Participants or Others
Written comments on the proposed rule change were not and are not
intended to be solicited with respect to the proposed rule change and
none have been received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may
[[Page 65030]]
designate if it finds such longer period to be appropriate and
publishes its reasons for so finding or (ii) as to which the self-
regulatory organization consents, the Commission will:
(A) by order approve or disapprove the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml), or
Send an email to rule-comments@sec.gov. Please include
File Number SR-OCC-2013-17 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington DC 20549-1090.
All submissions should refer to File Number SR-OCC-2013-17. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method of submission. The Commission will post all
comments on the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments,
all written statements with respect to the proposed rule change that
are filed with the Commission, and all written communications relating
to the proposed rule change between the Commission and any person,
other than those that may be withheld from the public in accordance
with the provisions of 5 U.S.C. 552, will be available for Web site
viewing and printing in the Commission's Public Reference Room located
at 100 F Street NE., Washington, DC 20549-1090 on official business
days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such
filing also will be available for inspection and copying at the
principal office of OCC and on OCC's Web site at https://www.optionsclearing.com/components/docs/legal/rules_and_bylaws/sr_occ_13_17.pdf. All comments received will be posted without change;
the Commission does not edit personal identifying information from
submissions. You should submit only information that you wish to make
available publicly. All submissions should refer to File Number SR-OCC-
2013-17 and should be submitted on or before November 20, 2013.
For the Commission by the Division of Trading and Markets,
pursuant to delegated authority.\19\
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\19\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-25646 Filed 10-29-13; 8:45 am]
BILLING CODE 8011-01-P
