Self-Regulatory Organizations; The Options Clearing Corporation; Order Approving Proposed Rule Change Concerning Charters for the Board of Directors, the Membership/Risk Committee, the Audit Committee and the Performance Committee, 75659-75660 [2013-29621]

Download as PDF Federal Register / Vol. 78, No. 239 / Thursday, December 12, 2013 / Notices necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or 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: maindgalligan on DSK5TPTVN1PROD with NOTICES Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– NASDAQ–2013–146 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–NASDAQ–2013–146. 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. The Commission will post all comments on the Commission’s Internet Web site (http://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, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. 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– VerDate Mar<15>2010 16:45 Dec 11, 2013 Jkt 232001 NASDAQ–2013–146 and should be submitted on or before January 2, 2014. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.17 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–29607 Filed 12–11–13; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–71022; File No. SR–OCC– 2013–17] Self-Regulatory Organizations; The Options Clearing Corporation; Order Approving Proposed Rule Change Concerning Charters for the Board of Directors, the Membership/Risk Committee, the Audit Committee and the Performance Committee December 6, 2013. I. Introduction On October 17, 2013, The Options Clearing Corporation (‘‘OCC’’) filed with the Securities and Exchange Commission (‘‘Commission’’) proposed rule change SR–OCC–2013–17 pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder.2 The proposed rule change was published for comment in the Federal Register on October 30, 2013.3 The Commission received no comments concerning the proposed rule change. For the reasons set forth below, the Commission is approving the proposed rule change. II. Description The proposed rule change concerns the charter of OCC’s Board of Directors (‘‘Board’’), as well as the charters of the Board’s Membership/Risk Committee (‘‘MRC’’), Audit Committee (‘‘AC’’), and Performance Committee (‘‘PC’’) (collectively, ‘‘Committee Charters’’).4 Board of Directors Charter The Board’s new charter (‘‘Board Charter’’) does not impose any new responsibilities on the Board, but rather reflects the existing powers and duties of the Board under OCC’s By-Laws and 17 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 Securities Exchange Act Release No. 70753 (October 24, 2013), 78 FR 65027 (October 30, 2013) (SR–OCC–2013–17). 4 OCC’s Board adopted its charter on March 7, 2013. Although OCC has had charters for its MRC, AC, and PC in place for a number of years, it has not previously submitted those as proposed rule changes pursuant to Section 19(b) of the Act. 1 15 PO 00000 Frm 00117 Fmt 4703 Sfmt 4703 75659 Rules, as well as the underlying practices that have been developed to aid the Board in meeting its obligations. According to OCC, the Board adopted a charter in an effort to provide outside parties with greater transparency into the Board’s oversight activities, to promote accountability, and to align OCC with current best practices in corporate governance. The Board Charter addresses the organization, composition, authority, functions, and responsibilities of the Board. With respect to membership, the Board Charter sets forth the size and composition of the Board, the qualifications for Board membership, and the term, tenure, and age limits applicable to each category of Board member. The Board Charter also addresses Board meetings, specifying that the Board will meet at least five times annually, that the Chairman of the Board will establish the agenda for each meeting in consultation with the President and Secretary, and that individual Directors must prepare for and attend each Board meeting. Additionally, the Board Charter incorporates many provisions of OCC’s existing By-Laws, including those governing the election, resignation, and disqualification of Directors,5 the establishment of Board committees and subcommittees, and the existence of a quorum. The Board Charter also defines the scope of the Board’s authority, providing, among other things, that the Board may make any inquiries it deems appropriate in executing its duties, and that the Board may confer with OCC management or employees as needed.6 The Board Charter reiterates the Board’s authority under the By-Laws to elect certain corporate officers annually, to form such committees and subcommittees as it deems appropriate, and to delegate authority to committee members. The Board Charter describes the Board’s cardinal duty as overseeing OCC to ensure that it is managed and operates in a manner that is consistent with OCC’s regulatory responsibilities. The Board is also tasked with 5 The Board Charter currently reflects that the Board has one Management Director, who is both the Chairman of the Board and Chief Executive Officer of OCC. OCC intends to split the office of the Chairman into two offices, Executive Chairman and President, both of whom will be elected as Management Directors. See Securities Exchange Act Release No. 70076 (July 30, 2013), 78 FR 47449 (August 5, 2013) (SR–OCC–2013–09). 6 The Chairman is permitted to ask OCC management or others to attend meetings and provide pertinent information. The Board may also hire specialists or rely on outside advisors or specialists. E:\FR\FM\12DEN1.SGM 12DEN1 75660 Federal Register / Vol. 78, No. 239 / Thursday, December 12, 2013 / Notices stewarding OCC to ensure it has the ability to achieve its objectives in a safe, sound, and prudential manner. The Board Charter reiterates many of the Board’s responsibilities under OCC’s By-Laws, including the obligations to determine disqualifications from Board service, to fill vacancies, to conduct hearings in connection with a denial or suspension of membership, and to suspend clearing members when appropriate. The Board Charter also lists additional Board responsibilities that do not appear in the By-Laws.7 The Board Charter also sets forth the duties and responsibilities of individual Directors, including the duty to act in good faith in the best interests of OCC, as well as with due regard for the fiduciary responsibilities owed to OCC as a systemically important financial market utility.8 Directors are also required to comply with the provisions of the Code of Conduct for OCC Directors, including the provisions relating to conflicts of interest and confidentiality. maindgalligan on DSK5TPTVN1PROD with NOTICES Committee Charters OCC has long maintained Charters for the MRC, AC, and PC (each, a ‘‘Committee,’’ and collectively, the ‘‘Committees’’). These Committee Charters describe the purpose of each Committee as assisting the Board in fulfilling certain of its oversight responsibilities. The Committee Charters further specify the policies and procedures governing the membership,9 organization, scope of authority, 7 These additional responsibilities include the following: (i) To oversee OCC’s governance processes; (ii) to approve and oversee OCC’s business strategies; (iii) to monitor OCC’s performance in delivering clearance and settlement services; (iv) to oversee OCC’s processes and framework for assessing, managing, and monitoring strategic, financial, and operational risk; (v) to oversee OCC’s financial reporting, auditing, accounting, and compliance processes; (vi) to oversee OCC’s system of internal controls; (vii) to foster processes designed to ensure that OCC complies with applicable laws and regulations, and that OCC operates in an ethical manner; (viii) to oversee OCC’s major capital expenditures and approve the annual budget and corporate plan; (ix) to oversee the development and design of employee compensation, incentive, and benefit programs; (x) to evaluate senior management performance regularly and approve the compensation of the Chairman and President; and (xi) to assure management succession. 8 On July 18, 2012, the Financial Stability Oversight Council (‘‘FSOC’’) designated OCC as a systemically important financial market utility under Title VIII of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Financial Stability Oversight Council, 2012 Annual Report, Appendix A, p.145, available at http:// www.treasury.gov/initiatives/fsoc/Documents/ 2012%20Annual%20Report.pdf. 9 Each Committee Charter requires the inclusion of at least one Public Director and empowers the Board to remove or replace any Committee member at any time. VerDate Mar<15>2010 16:45 Dec 11, 2013 Jkt 232001 functions, and responsibilities of each Committee. With respect to meetings, each Committee Charter establishes the Committee’s meeting schedule, quorum rules, minute-keeping, and reporting requirements. Each Committee Charter further provides that the meeting agenda is established by the Committee’s chairman, or his or her designee, in consultation with the Secretary and OCC’s management. A majority of the Committee members constitutes a quorum, and if the chairman is not present at a meeting, the members who are present must designate one of their number to serve as acting 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 teleconference or similar means.10 Each Committee’s charter describes the scope of its authority, which includes the power to act, subject to the Board’s direction, with respect to any matter necessary or appropriate to accomplish the purpose and responsibilities set forth in the Committee’s Charter, as well as the power to delegate this authority to any subcommittee that the Committee may form. Each Committee is also 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 is authorized to act on behalf of his or her Committee in the event immediate action is required and it is impractical to convene such Committee.12 Each Committee Charter sets forth a detailed list of the Committee’s respective functions and responsibilities, and also requires each Committee to review its charter annually and to submit any revised charters to OCC’s Board for reapproval. proposed rule change of a selfregulatory organization if it finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to such organization. Section 17A(b)(3)(F) of the Act 14 requires that the rules of a registered clearing agency be designed to, among other things, promote the prompt and accurate clearance and settlement of securities transactions, as well as protect investors and the public interest. The Commission finds that the proposed rule change is consistent with the Act’s requirements because the new and revised Board charters will clarify the responsibilities and operations of OCC’s Board and its committees. This clarity will help ensure that OCC maintains a robust and transparent governance structure that should promote the prompt and accurate clearance and settlement of securities transactions, and should further safeguard investors and the public interest. IV. Conclusion On the basis of the foregoing, the Commission finds that the proposal is consistent with the requirements of the Act, particularly the requirements of Section 17A of the Act 15 and the rules and regulations thereunder applicable to OCC. It is therefore ordered, pursuant to Section 19(b)(2) of the Act,16 that proposed rule change SR–OCC–2013–17 be and hereby is approved.17 For the Commission by the Division of Trading and Markets, pursuant to delegated authority.18 Elizabeth M. Murphy, Secretary. [FR Doc. 2013–29621 Filed 12–11–13; 8:45 am] BILLING CODE 8011–01–P III. Discussion Section 19(b)(2)(C) of the Act 13 directs the Commission to approve a 10 Meeting minutes must be kept and shared with the Board. 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 further confirm the Committees’ 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, seek ratification from the full committee for any actions the chair has taken unilaterally. 13 15 U.S.C. 78s(b)(2)(C). PO 00000 Frm 00118 Fmt 4703 Sfmt 9990 14 15 U.S.C. 78q–1(b)(3)(F). U.S.C. 78q–1. 16 15 U.S.C. 78s(b)(2). 17 In approving the proposed rule change, the Commission considered the proposal’s impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 18 17 CFR 200.30–3(a)(12). 15 15 E:\FR\FM\12DEN1.SGM 12DEN1

Agencies

[Federal Register Volume 78, Number 239 (Thursday, December 12, 2013)]
[Notices]
[Pages 75659-75660]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-29621]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71022; File No. SR-OCC-2013-17]


Self-Regulatory Organizations; The Options Clearing Corporation; 
Order Approving Proposed Rule Change Concerning Charters for the Board 
of Directors, the Membership/Risk Committee, the Audit Committee and 
the Performance Committee

December 6, 2013.

I. Introduction

    On October 17, 2013, The Options Clearing Corporation (``OCC'') 
filed with the Securities and Exchange Commission (``Commission'') 
proposed rule change SR-OCC-2013-17 pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 
thereunder.\2\ The proposed rule change was published for comment in 
the Federal Register on October 30, 2013.\3\ The Commission received no 
comments concerning the proposed rule change. For the reasons set forth 
below, the Commission is approving the proposed rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 70753 (October 24, 
2013), 78 FR 65027 (October 30, 2013) (SR-OCC-2013-17).
---------------------------------------------------------------------------

II. Description

    The proposed rule change concerns the charter of OCC's Board of 
Directors (``Board''), as well as the charters of the Board's 
Membership/Risk Committee (``MRC''), Audit Committee (``AC''), and 
Performance Committee (``PC'') (collectively, ``Committee 
Charters'').\4\
---------------------------------------------------------------------------

    \4\ OCC's Board adopted its charter on March 7, 2013. Although 
OCC has had charters for its MRC, AC, and PC in place for a number 
of years, it has not previously submitted those as proposed rule 
changes pursuant to Section 19(b) of the Act.
---------------------------------------------------------------------------

Board of Directors Charter

    The Board's new charter (``Board Charter'') does not impose any new 
responsibilities on the Board, but rather reflects the existing powers 
and duties of the Board under OCC's By-Laws and Rules, as well as the 
underlying practices that have been developed to aid the Board in 
meeting its obligations. According to OCC, the Board adopted a charter 
in an effort to provide outside parties with greater transparency into 
the Board's oversight activities, to promote accountability, and to 
align OCC with current best practices in corporate governance.
    The Board Charter addresses the organization, composition, 
authority, functions, and responsibilities of the Board. With respect 
to membership, the Board Charter sets forth the size and composition of 
the Board, the qualifications for Board membership, and the term, 
tenure, and age limits applicable to each category of Board member. The 
Board Charter also addresses Board meetings, specifying that the Board 
will meet at least five times annually, that the Chairman of the Board 
will establish the agenda for each meeting in consultation with the 
President and Secretary, and that individual Directors must prepare for 
and attend each Board meeting. Additionally, the Board Charter 
incorporates many provisions of OCC's existing By-Laws, including those 
governing the election, resignation, and disqualification of 
Directors,\5\ the establishment of Board committees and subcommittees, 
and the existence of a quorum.
---------------------------------------------------------------------------

    \5\ The Board Charter currently reflects that the Board has one 
Management Director, who is both the Chairman of the Board and Chief 
Executive Officer of OCC. OCC intends to split the office of the 
Chairman into two offices, Executive Chairman and President, both of 
whom will be elected as Management Directors. See Securities 
Exchange Act Release No. 70076 (July 30, 2013), 78 FR 47449 (August 
5, 2013) (SR-OCC-2013-09).
---------------------------------------------------------------------------

    The Board Charter also defines the scope of the Board's authority, 
providing, among other things, that the Board may make any inquiries it 
deems appropriate in executing its duties, and that the Board may 
confer with OCC management or employees as needed.\6\ The Board Charter 
reiterates the Board's authority under the By-Laws to elect certain 
corporate officers annually, to form such committees and subcommittees 
as it deems appropriate, and to delegate authority to committee 
members.
---------------------------------------------------------------------------

    \6\ The Chairman is permitted to ask OCC management or others to 
attend meetings and provide pertinent information. The Board may 
also hire specialists or rely on outside advisors or specialists.
---------------------------------------------------------------------------

    The Board Charter describes the Board's cardinal duty as overseeing 
OCC to ensure that it is managed and operates in a manner that is 
consistent with OCC's regulatory responsibilities. The Board is also 
tasked with

[[Page 75660]]

stewarding OCC to ensure it has the ability to achieve its objectives 
in a safe, sound, and prudential manner. The Board Charter reiterates 
many of the Board's responsibilities under OCC's By-Laws, including the 
obligations to determine disqualifications from Board service, to fill 
vacancies, to conduct hearings in connection with a denial or 
suspension of membership, and to suspend clearing members when 
appropriate. The Board Charter also lists additional Board 
responsibilities that do not appear in the By-Laws.\7\
---------------------------------------------------------------------------

    \7\ These additional responsibilities include the following: (i) 
To oversee OCC's governance processes; (ii) to approve and oversee 
OCC's business strategies; (iii) to monitor OCC's performance in 
delivering clearance and settlement services; (iv) to oversee OCC's 
processes and framework for assessing, managing, and monitoring 
strategic, financial, and operational risk; (v) to oversee OCC's 
financial reporting, auditing, accounting, and compliance processes; 
(vi) to oversee OCC's system of internal controls; (vii) to foster 
processes designed to ensure that OCC complies with applicable laws 
and regulations, and that OCC operates in an ethical manner; (viii) 
to oversee OCC's major capital expenditures and approve the annual 
budget and corporate plan; (ix) to oversee the development and 
design of employee compensation, incentive, and benefit programs; 
(x) to evaluate senior management performance regularly and approve 
the compensation of the Chairman and President; and (xi) to assure 
management succession.
---------------------------------------------------------------------------

    The Board Charter also sets forth the duties and responsibilities 
of individual Directors, including the duty to act in good faith in the 
best interests of OCC, as well as with due regard for the fiduciary 
responsibilities owed to OCC as a systemically important financial 
market utility.\8\ Directors are also required to comply with the 
provisions of the Code of Conduct for OCC Directors, including the 
provisions relating to conflicts of interest and confidentiality.
---------------------------------------------------------------------------

    \8\ On July 18, 2012, the Financial Stability Oversight Council 
(``FSOC'') designated OCC as a systemically important financial 
market utility under Title VIII of the Dodd-Frank Wall Street Reform 
and Consumer Protection Act. Financial Stability Oversight Council, 
2012 Annual Report, Appendix A, p.145, available at http://www.treasury.gov/initiatives/fsoc/Documents/2012%20Annual%20Report.pdf.
---------------------------------------------------------------------------

Committee Charters

    OCC has long maintained Charters for the MRC, AC, and PC (each, a 
``Committee,'' and collectively, the ``Committees''). These Committee 
Charters describe the purpose of each Committee as assisting the Board 
in fulfilling certain of its oversight responsibilities. The Committee 
Charters further specify the policies and procedures governing the 
membership,\9\ organization, scope of authority, functions, and 
responsibilities of each Committee.
---------------------------------------------------------------------------

    \9\ Each Committee Charter requires the inclusion of at least 
one Public Director and empowers the Board to remove or replace any 
Committee member at any time.
---------------------------------------------------------------------------

    With respect to meetings, each Committee Charter establishes the 
Committee's meeting schedule, quorum rules, minute-keeping, and 
reporting requirements. Each Committee Charter further provides that 
the meeting agenda is established by the Committee's chairman, or his 
or her designee, in consultation with the Secretary and OCC's 
management. A majority of the Committee members constitutes a quorum, 
and if the chairman is not present at a meeting, the members who are 
present must designate one of their number to serve as acting 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 teleconference or similar 
means.\10\
---------------------------------------------------------------------------

    \10\ Meeting minutes must be kept and shared with the Board.
---------------------------------------------------------------------------

    Each Committee's charter describes the scope of its authority, 
which includes the power to act, subject to the Board's direction, with 
respect to any matter necessary or appropriate to accomplish the 
purpose and responsibilities set forth in the Committee's Charter, as 
well as the power to delegate this authority to any subcommittee that 
the Committee may form. Each Committee is also 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 is authorized to act on behalf of his or her Committee in the 
event immediate action is required and it is impractical to convene 
such Committee.\12\
---------------------------------------------------------------------------

    \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 further 
confirm the Committees' 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, seek ratification from the full committee for any 
actions the chair has taken unilaterally.
---------------------------------------------------------------------------

    Each Committee Charter sets forth a detailed list of the 
Committee's respective functions and responsibilities, and also 
requires each Committee to review its charter annually and to submit 
any revised charters to OCC's Board for reapproval.

III. Discussion

    Section 19(b)(2)(C) of the Act \13\ directs the Commission to 
approve a proposed rule change of a self-regulatory organization if it 
finds that the proposed rule change is consistent with the requirements 
of the Act and the rules and regulations thereunder applicable to such 
organization. Section 17A(b)(3)(F) of the Act \14\ requires that the 
rules of a registered clearing agency be designed to, among other 
things, promote the prompt and accurate clearance and settlement of 
securities transactions, as well as protect investors and the public 
interest. The Commission finds that the proposed rule change is 
consistent with the Act's requirements because the new and revised 
Board charters will clarify the responsibilities and operations of 
OCC's Board and its committees. This clarity will help ensure that OCC 
maintains a robust and transparent governance structure that should 
promote the prompt and accurate clearance and settlement of securities 
transactions, and should further safeguard investors and the public 
interest.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78s(b)(2)(C).
    \14\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

IV. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposal is consistent with the requirements of the Act, particularly 
the requirements of Section 17A of the Act \15\ and the rules and 
regulations thereunder applicable to OCC.
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78q-1.
---------------------------------------------------------------------------

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\16\ that proposed rule change SR-OCC-2013-17 be and hereby is 
approved.\17\
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78s(b)(2).
    \17\ In approving the proposed rule change, the Commission 
considered the proposal's impact on efficiency, competition, and 
capital formation. 15 U.S.C. 78c(f).

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
---------------------------------------------------------------------------

    \18\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Elizabeth M. Murphy,
Secretary.
[FR Doc. 2013-29621 Filed 12-11-13; 8:45 am]
BILLING CODE 8011-01-P