Self-Regulatory Organizations; National Securities Clearing Corporation; Order Approving Proposed Rule Change To Amend the By-Laws, 12974-12978 [2018-06030]
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Federal Register / Vol. 83, No. 58 / Monday, March 26, 2018 / Notices
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establish, implement, maintain, and
enforce written policies and procedures
reasonably designed to provide for a
well-founded, transparent, and
enforceable legal basis for each aspect of
its activities in all relevant
jurisdictions.77
As discussed above, the proposed rule
change would update the By-Laws by
(1) providing specific requirements for,
and removing ambiguous language
around, the Board’s required meeting
frequency, (2) updating DTC’s
description of the titles and
responsibilities of its Board and senior
management to match DTC’s current
corporate structure, (3) documenting
DTC’s current compensation-setting
process, and (4) enacting technical
corrections to increase readability.
Each of the proposed changes is
designed to help ensure that the ByLaws better reflect DTC’s governance
practices in a clear, transparent, and
consistent manner. This increased
transparency would help convey to
DTC’s stakeholders, and the public
generally, a key legal basis for the
activities of the highest levels of DTC’s
leadership described in the By-Laws.
Therefore, the Commission finds that
the proposed rule change is designed to
help ensure that DTC’s organizational
documents remain well-founded,
transparent, and legally enforceable in
all relevant jurisdictions, consistent
with Rule 17Ad–22(e)(1) under the
Act.78
C. Rule 17Ad–22(e)(2)(i) and (v) Under
the Act
Rule 17Ad–22(e)(2)(i) and (v) under
the Act requires that DTC establish,
implement, maintain and enforce
written policies and procedures
reasonably designed to provide for
governance arrangements that, among
other things, (1) are clear and
transparent and (2) specify clear and
direct lines of responsibility.79
As described above, DTC proposes a
number of changes to its By-Laws that
would provide clarity and transparency
by setting specific standards for DTC (in
the case of Board meeting frequency),
and revising By-Laws provisions that
were outdated or incorrect (in the case
of responsibilities and titles of its Board
members and senior management,
compensation-setting practices, and
technical edits). Specifically, the new
Board meeting requirements would set
clear numerical parameters around the
www.treasury.gov/press-center/press-releases/
Pages/tg1645.asp. Therefore, DTC is a covered
clearing agency.
77 17 CFR 240.17Ad–22(e)(1).
78 Id.
79 17 CFR 240.17Ad–22(e)(2)(i) and (v).
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specific frequency of such meetings,
while also providing consistency with
similar meetings at FICC and NSCC. The
proposal also would provide clarity that
the Board does not have to meet
monthly (as is currently stated) by
removing the qualifier ‘‘monthly.’’ The
proposed change allowing the Board to
act by unanimous written consent, in
lieu of a meeting, also would help
provide transparency by clearly
indicating how the Board may act
without conducting a formal meeting.
Similarly, the proposed changes to the
titles and offices (and their related
powers and duties) would provide
clarity and transparency because they
would clearly set forth DTC’s current
organizational structure, including the
lines of responsibility of various officers
and the Board. The proposed changes
relating to compensation-setting would
also give clarity and transparency by (1)
accurately reflecting the process that is
followed pursuant to the Compensation
Committee Charter, and (2) clarifying
that the Non-Executive Chairman of the
Board does not receive compensation.
Finally, the proposed technical changes
and corrections would raise the clarity
and transparency of the By-Laws by
removing grammatical and
typographical errors.
For these reasons, the Commission
finds that the proposed rule change is
designed to enhance clarity and
transparency in DTC’s governance
arrangements, as well as to specify clear
and direct lines of responsibility for
various officer positions and the Board
within DTC’s organizational structure,
consistent with Rule 17Ad–22(e)(2)(i)
and (v) under the Act.80
III. Conclusion
On the basis of the foregoing, the
Commission finds that the proposal is
consistent with the requirements of the
Act, in particular the requirements of
Section 17A of the Act 81 and the rules
and regulations thereunder.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act, that
proposed rule change SR–DTC–2018–
001 be, and hereby is, APPROVED.82
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.83
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–06021 Filed 3–23–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–82916; File No. SR–NSCC–
2018–001]
Self-Regulatory Organizations;
National Securities Clearing
Corporation; Order Approving
Proposed Rule Change To Amend the
By-Laws
March 20, 2018.
On February 2, 2018, National
Securities Clearing Corporation
(‘‘NSCC’’) filed with the Securities and
Exchange Commission (‘‘Commission’’)
proposed rule change SR–NSCC–2018–
001, 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 February 14, 2018.3 The
Commission did not receive any
comment letters on the proposed rule
change. For the reasons discussed
below, the Commission approves the
proposed rule change.
I. Description of the Proposed Rule
Change
The proposed rule change would
amend the NSCC By-Laws (‘‘By-Laws’’) 4
to (1) change certain NSCC Board of
Directors (‘‘Board’’) titles, officer titles,
and offices (and their respective powers
and duties), (2) update the
compensation section for officers, and
(3) make technical changes and
corrections, each discussed more fully
below. The proposed rule change would
amend the Rules to incorporate, by
reference, the By-Laws and the
Certificate of Incorporation.
A. Changes to Certain Titles, Offices,
and Related Powers and Duties
NSCC proposes changes to the titles,
offices, and related powers and duties of
83 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. 82674
(February 8, 2018), 83 FR 6633 (February 14, 2018)
(SR–NSCC–2018–001) (‘‘Notice’’).
4 As discussed below, the By-Laws and NSCC’s
Certificate of Incorporation (‘‘Certificate of
Incorporation’’) would each be incorporated by
reference into NSCC’s Rules and Procedures
(‘‘Rules’’), available at https://www.dtcc.com/legal/
rules-and-procedures.
1 15
80 Id.
81 15
U.S.C. 78q–1.
approving the proposed rule change, the
Commission considered the proposals’ impact on
efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
82 In
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Federal Register / Vol. 83, No. 58 / Monday, March 26, 2018 / Notices
certain Board and officer personnel, as
further described below.
1. Non-Executive Chairman of the Board
NSCC proposes to replace the title of
‘‘Chairman of the Board’’ with the title
of ‘‘Non-Executive Chairman of the
Board.’’ 5 NSCC proposes to change its
By-Laws to reflect that this position is
held by a non-executive.6 Therefore,
NSCC would change relevant references
in the By-Laws from ‘‘Chairman’’ and
‘‘Chairman of the Board’’ to ‘‘NonExecutive Chairman of the Board.’’ 7
NSCC also would delete certain
references in the By-Laws to the NonExecutive Chairman of the Board as a
member of NSCC management because
the position is no longer in
management.8
In the proposed Section 2.8 (NonExecutive Chairman of the Board),
NSCC would identify the powers and
duties of the Non-Executive Chairman
of the Board, including (1) general
responsibility for carrying out the
policies of the Board, (2) general
supervision of the Board and its
activities and general leadership of the
Board, (3) presiding over stockholders’
meetings (when present), and (4) such
other powers and duties as the Board
may designate.9 Proposed Section 2.8
(Non-Executive Chairman of the Board)
also would include a provision stating
that a presiding director (as elected by
the Board) shall preside at all
stockholders and Board meetings when
the Non-Executive Chairman of the
Board is absent.10 Additionally,
Proposed Section 2.8 (Non-Executive
Chairman of the Board) would provide
that the Non-Executive Chairman of the
Board’s performance of any enumerated
duty shall be conclusive evidence of his
power to act.11
5 Notice,
83 FR at 6634.
6 Id.
7 Id.
8 Id.
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9 Id.
10 Id. This provision is designed to correct an
inaccuracy in current By-Laws Section 3.3 (Powers
and Duties of the President), which gives presiding
authority over stockholder meetings to the
President when the Chairman of the Board is
absent. Proposed Section 2.8 (Non-Executive
Chairman of the Board) would be consistent with
the Mission Statement and Charter of the
Depository Trust Corporation (‘‘DTC’’), Fixed
Income Clearing Corporation (‘‘FICC’’), NSCC, and
the Depository Trust and Clearing Corporation
(‘‘DTCC’’), which gives presiding authority over
stockholder meetings to a presiding director when
the Non-Executive Chairman of the Board is absent.
DTC, FICC, and NSCC are subsidiaries of DTCC,
each having the same Board of Directors as DTCC.
See Securities Exchange Act Release No. 74142
(January 27, 2015), 80 FR 5188 (January 30, 2015)
(SR–FICC–2014–810, SR–NSCC–2014–811, SR–
DTC–2014–812).
11 Notice, 83 FR at 6634.
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The proposal also identifies the
individuals to whom the Non-Executive
Chairman may assign duties. In
proposed Section 3.2 (Powers and
Duties of the President and Chief
Executive Officer), the Non-Executive
Chairman of the Board would have the
authority to designate powers and
duties to the President and Chief
Executive Officer (‘‘CEO’’).12 In
proposed Section 3.2 (Powers and
Duties of Managing Directors), NSCC
also would add the Non-Executive
Chairman of the Board to the list of
individuals who have the ability to
assign powers and duties to Managing
Directors.13 Finally, in proposed Section
3.4 (Powers and Duties of the Secretary),
the Non-Executive Chairman of the
Board (i.e., not the President and CEO)
would have the authority to assign
additional powers and duties to the
Secretary.14
2. Office of the CEO
NSCC proposes to revise the By-Laws
to reflect that one individual holds the
office of the President and CEO. As
such, the proposal would change the
By-Laws to add the office of the CEO
and combine the office of the President
and the office of the CEO into one office
(President and CEO).15 While current
Section 3.3 (Powers and Duties of the
President) provides that the President
shall be the CEO, current Section 3.1
(General Provisions) does not include
CEO in the list of designated officer
positions, though President is currently
included in this list.16 Therefore, NSCC
proposes to revise the relevant
references in the By-Laws from
President to President and CEO.17
Additionally, NSCC proposes to make
several By-Laws revisions to reflect the
responsibilities for the consolidated role
of President and CEO.18 First, NSCC
would delete and replace current
Section 3.3 (Powers and Duties of the
President) with proposed Section 3.2
(Powers and Duties of the President and
CEO).19 Proposed Section 3.2 (Powers
and Duties of the President and CEO)
would clarify the powers and duties
associated with the role of President and
CEO.20 For example, in proposed
Section 3.2 (Powers and Duties of the
President and CEO) the President and
CEO would have general supervision
over the overall business strategy,
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business operations, systems, customer
outreach, as well as risk management,
control, and staff functions, subject to
the direction of the Board and the NonExecutive Chairman of the Board.21 In
addition, because the office of the Chief
Operating Officer (‘‘COO’’) would be
eliminated (as described further below),
the current COO responsibility of
general supervision over NSCC’s
operations in current Section 3.4
(Powers and Duties of the Chief
Operating Officer) would be assigned to
the President and CEO.22 Proposed
Section 3.2 (Powers and Duties of the
President and CEO) would also
delineate the authority that the NonExecutive Chairman of the Board has
over the President and CEO by stating
that the latter would have such other
powers and perform such other duties
as the Board or the Non-Executive
Chairman of the Board may designate.23
NSCC also proposes to reassign or
reclassify several responsibilities
currently assigned to the President.24
Specifically, the responsibility for
executing the Board’s policies would be
assigned to the Non-Executive Chairman
of the Board rather than to the President
and CEO.25 Additionally, NSCC would
remove the statement ‘‘performance of
any such duty by the President shall be
conclusive evidence of his power to act’’
in current Section 3.3 (Powers and
Duties of the President).26
As mentioned above, NSCC would
delete language from the By-Laws
stating that, in the absence of the
Chairman of the Board, the President
shall preside at all meetings of
shareholders and all Board meetings
(when present).27 Similarly, NSCC
would delete language from the ByLaws stating that the President and
Board currently have the authority to
assign powers and duties to the
Comptroller in current Section 3.8
(Powers and Duties of the Comptroller),
as discussed below.28 In proposed
Section 3.5 (Powers and Duties of the
Chief Financial Officer) the President
and CEO and Board would have the
authority to assign duties to the Chief
Financial Officer (‘‘CFO’’).29
The proposal also removes certain
responsibilities from the President. In
proposed Section 3.4 (Powers and
21 Id.
22 Id.
12 Notice,
83 FR at 6635.
23 Id.
13 Id.
24 Id.
14 Id.
25 Id.
15 Id.
26 Id.
16 Id.
27 Id. As stated above, that power resides with the
presiding director who is elected annually by the
Board. See supra note 20.
28 Notice, 83 FR at 6642.
29 Id.
17 Id.
18 Id.
19 Id.
20 Id.
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Federal Register / Vol. 83, No. 58 / Monday, March 26, 2018 / Notices
Duties of the Secretary), the power to
assign additional powers and duties to
the Secretary would be removed from
the President and granted to the NonExecutive Chairman of the Board.30
3. Office of the CFO; Office of the
Comptroller
The proposal would add the office of
the CFO and assign to the CFO general
supervision of the financial operations
of NSCC.31 References in the By-Laws to
the Comptroller would be deleted
because NSCC states that it neither has
a Comptroller nor plans to appoint
one.32 In proposed Section 3.5 (Powers
and Duties of the Chief Financial
Officer) the CFO would be granted
overall supervision authority over the
financial operations of NSCC, and upon
request, the CFO would counsel and
advise other officers of NSCC and
perform other duties as agreed with the
President and CEO (or as determined by
the Board).33 The proposal also provides
that the CFO would report directly to
the President and CEO.34 Furthermore,
because the Treasurer would directly
report to the CFO, proposed Section 3.6
(Powers and Duties of the Treasurer)
would provide that the Treasurer would
have all such powers and duties as
generally are incident to the position of
Treasurer or as the CFO (in addition to
the President and CEO and the Board)
may assign.35
4. Office of the COO
In this proposal, NSCC would delete
references in the By-Laws to the COO
because NSCC states that it no longer
has a COO and has no plans to appoint
one.36
5. Executive Director; Vice President
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In this proposal, NSCC would change
the title of Vice President to Executive
Director, and update the Executive
Director position’s related powers and
duties to reflect the position’s seniority
level.37 In NSCC’s organizational
structure, Executive Directors report to
Managing Directors.38 Due to this level
of seniority, NSCC proposes to remove
provisions in the By-Laws that
previously allowed Vice Presidents
(now, Executive Directors) to call
special meetings of shareholders, to sign
share certificates, or to preside over
shareholder meetings unless specifically
designated to do so by the Board.39
6. Other Changes to the Powers and
Duties of the Board and Certain Other
Designated Officers
In proposed Section 3.1 (General
Provisions), NSCC proposes to add a
parenthetical phrase to clarify that the
Board’s power to appoint other officers
includes, but is not limited to, the
power to appoint a Vice Chairman of the
Corporation and one or more Executive
Directors.40 Additionally, in current
Section 3.1 (General Provisions), NSCC
proposes to clarify that neither the
Secretary nor any Assistant Secretary
can hold the following offices (1) Vice
Chairman of the Corporation or (2)
President and CEO.41
The proposal also enumerates the
responsibilities of NSCC’s Managing
Directors.42 In proposed Section 1.8
(Presiding Officer and Secretary),
Managing Directors would be removed
from the list of officers authorized to
preside over a stockholders’ meeting
unless specifically authorized by the
Board.43 Similarly, in proposed Section
2.6 (Meetings), Managing Directors
would be added to the list of officers
authorized to call special meetings of
the Board.44
NSCC also proposes to amend the ByLaws to remove specific powers from
the Treasurer and Assistant Treasurer.45
In current Section 5.1 (Certificates of
Shares), NSCC proposes to delete the
reference to Treasurer and Assistant
Treasurer from the list of authorized
signatories because NSCC expects the
Secretary or Assistant Secretary (who
are each currently listed as authorized
signatories) to sign any share
certificates.46
B. Compensation of the President and
CEO
Proposed Section 3.10 (Compensation
of the President and CEO) would reflect
NSCC’s current compensation-setting
practices. Current Section 3.12
(Compensation of Officers) states that
(1) the compensation, if any, of the
Chairman of the Board, and the
President shall be fixed by a majority
(which shall not include the Chairman
of the Board or the President) of the
entire Board of Directors, and (2)
salaries of all other officers shall be
fixed by the President with the approval
30 Id.
31 Notice,
83 FR at 6636.
39 Id.
32 Id.
40 Id.
33 Id.
41 Id.
34 Id.
42 Id.
35 Id.
43 Id.
36 Id.
44 Id.
37 Id.
45 Notice,
38 Id.
46 Id.
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83 FR at 6637.
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of the Board and no officer shall be
precluded from receiving a salary
because he is also a director.47 NSCC
proposes to state that the Compensation
Committee of the Corporation will
recommend the compensation for the
President and CEO to the Board of
Directors for approval.48 In addition,
NSCC also proposes to delete the
language stating that (1) salaries of all
other officers shall be fixed by the
President with approval of the Board,
and (2) no officer shall be precluded
from receiving a salary because he is
also a director.49 NSCC proposes to
delete compensation-related references
to the Chairman of the Board because
the Non-Executive Chairman of the
Board does not receive compensation.50
Finally, NSCC proposes to change the
title of proposed Section 3.10 from
‘‘Compensation of Officers’’ to
‘‘Compensation of the President and
Chief Executive Officer’’ because this
section would no longer address the
compensation of officers other than the
President and CEO.51
C. Technical Changes and Corrections
NSCC proposes technical changes
and/or corrections to the By-Laws for
clarity and readability, as described
below.52
1. Statutory References and
Requirements
NSCC would delete direct statutory
references from the By-Laws.53 NSCC
states that it would make this change to
have the By-Laws remain consistent and
accurate despite any changes to a
specifically cited statute.54
2. Audit Committee
NSCC proposes to revise proposed
Section 2.11 (Audit Committee) to have
the description of its Audit Committee
conform to the description of the Audit
Committee in the by-laws of FICC.55
3. Other Technical Changes and
Corrections
NSCC proposes to make additional
technical and grammatical changes to
address (1) typographical errors, (2)
section numbering, (3) grammatical
47 Id.
48 Notice, 83 FR at 6637. NSCC states that it
proposes this change for consistency with the
DTCC/DTC/FICC/NSCC Compensation and Human
Resources Committee Charter. Id.
49 Id.
50 Id.
51 Notice, 83 FR at 6644.
52 Id.
53 Id.
54 Id.
55 Id.
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errors, (4) heading consistency, and (5)
gender references.56
D. Proposed Changes to the Rules
NSCC proposes to add an addendum
(‘‘Addendum V’’) to the Rules.57 NSCC
proposes that Addendum V would be
entitled ‘‘By-Laws and Restated
Certificate of Incorporation’’ and would
indicate that the By-Laws and
Certificate of Incorporation are
incorporated into the Rules by
reference.58
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II. Discussion and Commission
Findings
Section 19(b)(2)(C) of the Act directs
the Commission to approve a proposed
rule change of a self-regulatory
organization if it finds that such
proposed rule change is consistent with
the requirements of the Act and rules
and regulations thereunder applicable to
such organization.59 The Commission
believes the proposal is consistent with
Act, specifically Section 17A(b)(3)(F) of
the Act and Rules 17Ad–22(e)(1) and, in
part, (2) under the Act.60
A. Section 17A(b)(3)(F) of the Act
Section 17A(b)(3)(F) of the Act
requires, in part, that the rules of a
clearing agency, such as NSCC, be
designed to protect the public interest.61
As discussed above, the proposed rule
change would make a number of
updates to the By-Laws.
First, NSCC proposes to revise NSCC’s
description of the titles and
responsibilities of its Board and senior
management to match NSCC’s current
corporate structure. These changes
would help the Board, as well as
NSCC’s management, employees, and
members, understand which officer or
office is responsible for each of NSCC’s
executive-level functions.
Second, the proposal would update
the compensation-setting section of the
By-Laws to reflect the Compensation
Committee Charter practice, as well as
to reflect that the Non-Executive
Chairman of the Board would not
receive compensation. The proposal’s
increased clarity around compensationsetting would better inform NSCC
stakeholders and the general public
about how NSCC sets the level of
compensation for its highest-level
executive (the President and CEO) and
that the Non-Executive Chairman does
not draw a salary.
56 Notice,
57 Notice,
83 FR at 6637–38.
83 FR at 6638.
58 Id.
59 15
U.S.C. 78s(b)(2)(C).
U.S.C. 78q–1(b)(3)(F); 17 CFR 240.17Ad–
22(e)(1) and (2).
61 15 U.S.C. 78q–1(b)(3)(F).
60 15
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Third, NSCC’s proposed technical
changes and corrections to its By-Laws
would enhance the clarity,
transparency, and readability of NSCC’s
organizational documents. In this way,
the proposal would better enable the
Board, as well as NSCC’s management,
employees, and members, to understand
their respective authorities, rights, and
obligations regarding NSCC’s clearance
and settlement of securities
transactions.
Finally, NSCC’s proposed addendum
would incorporate the By-Laws and
Certificate of Incorporation into the
Rules. This change would increase the
clarity and transparency of NSCC’s
organizational documents by integrating
the By-Laws and the Certificate of
Incorporation into the Rules, to which
all NSCC members are subject and have
access.
Governance arrangements are critical
to the sound operation of clearing
agencies.62 Specifically, clear and
transparent governance documents
promote accountability and reliability in
the decisions, rules, and procedures of
a clearing agency.63 Clear and
transparent governance documents also
provide interested parties, including
owners, members, and general members
of the public, with information about
how a clearing agency’s decisions are
made and what the rules and
procedures are designed to
accomplish.64 Further, the decisions,
rules, and procedures of a clearing
agency are important, as they can have
widespread impact, affecting multiple
market members, financial institutions,
markets, and jurisdictions.65
As stated above, the proposed rule
change would provide NSCC
stakeholders with a better
understanding of how NSCC makes
decisions that could ultimately affect
the financial system. Such transparency
helps ensure that NSCC reliably makes
decisions and follows clearly articulated
policies and procedures. Accordingly,
the Commission finds that the proposed
rule change is designed to enhance the
clarity and transparency of NSCC’s
organizational documents, which would
help protect the public interest,
consistent with Section 17A(b)(3)(F) of
the Act.66
62 Securities Exchange Act Release No. 71699
(May 21, 2014), 79 FR 29508 (May 22, 2014)
(‘‘Covered Clearing Agency Standards Proposing
Release’’) at 29521.
63 Securities Exchange Act Release No. 64017
(March 3, 2011), 76 FR 14472 (March 16, 2011) at
14488.
64 Id.
65 Covered Clearing Agency Standards Proposing
Release, 79 FR at 29521.
66 15 U.S.C. 78q–1(b)(3)(F).
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B. Rule 17Ad–22(e)(1) Under the Act
Rule 17Ad–22(e)(1) under the Act
requires a covered clearing agency 67 to
establish, implement, maintain, and
enforce written policies and procedures
reasonably designed to provide for a
well-founded, transparent, and
enforceable legal basis for each aspect of
its activities in all relevant
jurisdictions.68
As discussed above, the proposed rule
change would update the By-Laws by
(1) updating NSCC’s description of the
titles and responsibilities of its Board
and senior management to match
NSCC’s current corporate structure, (2)
documenting NSCC’s current
compensation-setting process, and (3)
enacting technical corrections to
increase readability. The proposed rule
change would also add an addendum to
the Rules to incorporate the By-Laws
and the Certificate of Incorporation by
reference.
The proposed changes are designed to
help ensure that the By-Laws better
reflect NSCC’s governance practices, as
well as to organize NSCC’s
organizational documents, in a clear,
transparent, and consistent manner.
This increased transparency would help
convey to NSCC’s stakeholders, and the
public generally, a key legal basis for the
activities of the highest levels of NSCC’s
leadership described in the By-Laws.
Therefore, the Commission finds that
the proposed rule change is designed to
help ensure that NSCC’s organizational
documents remain well-founded,
transparent, and legally enforceable in
all relevant jurisdictions, consistent
with Rule 17Ad–22(e)(1) under the
Act.69
C. Rule 17Ad–22(e)(2)(i) and (v) Under
the Act
Rule 17Ad–22(e)(2)(i) and (v) under
the Act requires that NSCC establish,
implement, maintain and enforce
written policies and procedures
reasonably designed to provide for
governance arrangements that, among
other things, (1) are clear and
67 A ‘‘covered clearing agency’’ means, among
other things, a clearing agency registered with the
Commission under Section 17A of the Exchange
Act (15 U.S.C. 78q–1 et seq.) that is designated
systemically important by the Financial Stability
Oversight Counsel (‘‘FSOC’’) pursuant to the
Payment, Clearing, and Settlement Supervision Act
of 2010 (12 U.S.C. 5461 et seq.). See 17 CFR
240.17Ad–22(a)(5)–(6). On July 18, 2012, FSOC
designated NSCC as systemically important. U.S.
Department of the Treasury, ‘‘FSOC Makes First
Designations in Effort to Protect Against Future
Financial Crises,’’ available at https://
www.treasury.gov/press-center/press-releases/
Pages/tg1645.asp. Therefore, NSCC is a covered
clearing agency.
68 17 CFR 240.17Ad–22(e)(1).
69 Id.
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Federal Register / Vol. 83, No. 58 / Monday, March 26, 2018 / Notices
transparent and (2) specify clear and
direct lines of responsibility.70
As described above, NSCC proposes a
number of changes that would provide
clarity and transparency. NSCC
proposes to revise By-Laws provisions
that were outdated or incorrect.
Specifically, the proposed changes to
the titles and offices (and their related
powers and duties) would provide
clarity and transparency because they
would clearly set forth NSCC’s current
organizational structure, including the
lines of responsibility of various officers
and the Board. The proposed changes
relating to compensation-setting would
also give clarity and transparency by (1)
accurately reflecting the process that is
followed pursuant to the Compensation
Committee Charter, and (2) clarifying
that the Non-Executive Chairman of the
Board does not receive compensation.
Finally, the proposed technical changes
and corrections would raise the clarity
and transparency of the By-Laws by
removing grammatical and
typographical errors. Additionally,
NSCC also proposes changes to its Rules
to provide clarity and transparency.
Specifically, the proposed changes
would create clarity and transparency
by integrating the By-Laws and the
Certificate of Incorporation into one
document, the Rules (to which all NSCC
members are subject and have access).
For these reasons, the Commission
finds that the proposed rule change is
designed to enhance clarity and
transparency in NSCC’s governance
arrangements, as well as to specify clear
and direct lines of responsibility for
various officer positions and the Board
within NSCC’s organizational structure,
consistent with Rule 17Ad–22(e)(2)(i)
and (v) under the Act.71
sradovich on DSK3GMQ082PROD with NOTICES
CFR 240.17Ad–22(e)(2)(i) and (v).
71 Id.
72 15
U.S.C. 78q–1.
approving the proposed rule change, the
Commission considered the proposals’ impact on
efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
73 In
16:38 Mar 23, 2018
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–82914; File No. SR–DTC–
2017–022]
Self-Regulatory Organizations; The
Depository Trust Company; Order
Instituting Proceedings To Determine
Whether To Approve or Disapprove a
Proposed Rule Change To Amend the
Loss Allocation Rules and Make Other
Changes
March 20, 2018.
I. Introduction
On December 18, 2017, The
Depository Trust Company (‘‘DTC’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 proposed rule
change SR–DTC–2017–022 to amend the
loss allocation rules and make other
changes (‘‘Proposed Rule Change’’).3
The Proposed Rule Change was
published for comment in the Federal
Register on January 8, 2018.4 The
Commission did not receive any
comments on the Proposed Rule
Change. On February 8, 2018, pursuant
to Section 19(b)(2)(A)(ii)(I) of the Act,5
the Commission designated a longer
period within which to approve,
disapprove, or institute proceedings to
determine whether to approve or
disapprove the Proposed Rule Change.6
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 On December 18, 2017, DTC filed this proposal
as an advance notice (SR–DTC–2017–804) with the
Commission pursuant to Section 806(e)(1) of the
Payment, Clearing, and Settlement Supervision Act
of 2010 (‘‘Clearing Supervision Act’’) and Rule 19b–
4(n)(1)(i) of the Act (‘‘Advance Notice’’). On January
24, 2018, the Commission extended the review
period of the Advance Notice for an additional 60
days pursuant to Section 806(e)(1)(H) of the
Clearing Supervision Act. See 12 U.S.C. 5465(e)(1);
17 CFR 240.19b–4(n)(1)(i); 12 U.S.C. 5465(e)(1)(H);
and Securities Exchange Act Release No. 82582
(January 24, 2018), 83 FR 4297 (January 30, 2018)
(SR–DTC–2017–804).
4 Securities Exchange Act Release No. 82426
(January 2, 2018), 83 FR 913 (January 8, 2018) (SR–
DTC–2017–022) (‘‘Notice’’).
5 15 U.S.C. 78s(b)(2)(A)(ii)(I).
6 Securities Exchange Act Release No. 82670
(February 8, 2018), 83 FR 6626 (February 14, 2018)
(SR–DTC–2017–022; SR–FICC–2017–022; SR–
NSCC–2017–018).
1 15
On the basis of the foregoing, the
Commission finds that the proposal is
consistent with the requirements of the
Act, in particular the requirements of
Section 17A of the Act 72 and the rules
and regulations thereunder.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act, that
proposed rule change SR–NSCC–2018–
001 be, and hereby is, approved.73
VerDate Sep<11>2014
[FR Doc. 2018–06030 Filed 3–23–18; 8:45 am]
74 17
III. Conclusion
70 17
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.74
Eduardo A. Aleman,
Assistant Secretary.
Jkt 244001
PO 00000
Frm 00041
Fmt 4703
Sfmt 4703
This order institutes proceedings,
pursuant to Section 19(b)(2)(B) of the
Act,7 to determine whether to approve
or disapprove the Proposed Rule
Change.
II. Summary of the Proposed Rule
Change 8
As described in the Notice,9 DTC
proposes to revise Rule 4 (Participants
Fund and Participants Investment) to
primarily change (i) the application of
the Participants Fund in a Participant
Default and for settlement,10 (ii) the loss
allocation process,11 (iii) the loss
allocation governance for Non-Default
Events,12 and (iv) the retention time for
the Actual Participants Fund Deposit of
former participants.13 Furthermore, the
Proposed Rule change would revise
Rule 1 (Definitions; Governing Law) to
add cross-references to terms that would
be defined in proposed Rule 4.14
A. Application of the Participants Fund
in a Participant Default and for
Settlement
DTC proposes to revise Rule 4,
Section 4 (Application of Participants
Fund Deposits of Non-Defaulting
Participants) to address the situation
where the application of the Actual
Participants Fund Deposit of a
Participant that has failed to settle is
insufficient to complete settlement
among non-defaulting Participants on
any Business Day.15 In such a situation,
proposed Section 4 would state that the
Participants Fund shall constitute a
liquidity resource which may be applied
by DTC in such amounts as DTC shall
determine, in its sole discretion, to fund
settlement among non-defaulting
Participants.16
7 15
U.S.C. 78s(b)(2)(B).
Commission notes that the Summary of the
Proposed Rule Change section does not describe the
Proposed Rule Change in its entirety. Other changes
include, but are not limited to, the clarification of
defined terms, various aspects of the settlement
charges, and detailed procedures of the loss
allocation. The complete Proposed Rule Change can
be found in the Notice. See Notice, supra note 4.
In addition, the text of the Proposed Rule Change
is available at https://www.dtcc.com/legal/rules-andprocedures.aspx.
9 The description of the Proposed Rule Change
herein is based on the statements prepared by DTC
in the Notice. See Notice, supra note 4. Each
capitalized term not otherwise defined herein has
its respective meaning either (i) as set forth in the
Rules, By-Laws and Organization Certificate of
DTC, available at https://www.dtcc.com/legal/rulesand-procedures.aspx, or (ii) as set forth in the
Notice.
10 See Notice, supra note 4, at 914–15.
11 See id. at 915–18.
12 See id. at 918.
13 See id. at 918–19.
14 See id. at 919.
15 Id. at 915.
16 Id. at 919.
8 The
E:\FR\FM\26MRN1.SGM
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]]>Agencies
[Federal Register Volume 83, Number 58 (Monday, March 26, 2018)]
[Notices]
[Pages 12974-12978]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-06030]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-82916; File No. SR-NSCC-2018-001]
Self-Regulatory Organizations; National Securities Clearing
Corporation; Order Approving Proposed Rule Change To Amend the By-Laws
March 20, 2018.
On February 2, 2018, National Securities Clearing Corporation
(``NSCC'') filed with the Securities and Exchange Commission
(``Commission'') proposed rule change SR-NSCC-2018-001, 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 February 14, 2018.\3\ The
Commission did not receive any comment letters on the proposed rule
change. For the reasons discussed below, the Commission approves the
proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Securities Exchange Act Release No. 82674 (February 8,
2018), 83 FR 6633 (February 14, 2018) (SR-NSCC-2018-001)
(``Notice'').
---------------------------------------------------------------------------
I. Description of the Proposed Rule Change
The proposed rule change would amend the NSCC By-Laws (``By-Laws'')
\4\ to (1) change certain NSCC Board of Directors (``Board'') titles,
officer titles, and offices (and their respective powers and duties),
(2) update the compensation section for officers, and (3) make
technical changes and corrections, each discussed more fully below. The
proposed rule change would amend the Rules to incorporate, by
reference, the By-Laws and the Certificate of Incorporation.
---------------------------------------------------------------------------
\4\ As discussed below, the By-Laws and NSCC's Certificate of
Incorporation (``Certificate of Incorporation'') would each be
incorporated by reference into NSCC's Rules and Procedures
(``Rules''), available at https://www.dtcc.com/legal/rules-and-procedures.
---------------------------------------------------------------------------
A. Changes to Certain Titles, Offices, and Related Powers and Duties
NSCC proposes changes to the titles, offices, and related powers
and duties of
[[Page 12975]]
certain Board and officer personnel, as further described below.
1. Non-Executive Chairman of the Board
NSCC proposes to replace the title of ``Chairman of the Board''
with the title of ``Non-Executive Chairman of the Board.'' \5\ NSCC
proposes to change its By-Laws to reflect that this position is held by
a non-executive.\6\ Therefore, NSCC would change relevant references in
the By-Laws from ``Chairman'' and ``Chairman of the Board'' to ``Non-
Executive Chairman of the Board.'' \7\ NSCC also would delete certain
references in the By-Laws to the Non-Executive Chairman of the Board as
a member of NSCC management because the position is no longer in
management.\8\
---------------------------------------------------------------------------
\5\ Notice, 83 FR at 6634.
\6\ Id.
\7\ Id.
\8\ Id.
---------------------------------------------------------------------------
In the proposed Section 2.8 (Non-Executive Chairman of the Board),
NSCC would identify the powers and duties of the Non-Executive Chairman
of the Board, including (1) general responsibility for carrying out the
policies of the Board, (2) general supervision of the Board and its
activities and general leadership of the Board, (3) presiding over
stockholders' meetings (when present), and (4) such other powers and
duties as the Board may designate.\9\ Proposed Section 2.8 (Non-
Executive Chairman of the Board) also would include a provision stating
that a presiding director (as elected by the Board) shall preside at
all stockholders and Board meetings when the Non-Executive Chairman of
the Board is absent.\10\ Additionally, Proposed Section 2.8 (Non-
Executive Chairman of the Board) would provide that the Non-Executive
Chairman of the Board's performance of any enumerated duty shall be
conclusive evidence of his power to act.\11\
---------------------------------------------------------------------------
\9\ Id.
\10\ Id. This provision is designed to correct an inaccuracy in
current By-Laws Section 3.3 (Powers and Duties of the President),
which gives presiding authority over stockholder meetings to the
President when the Chairman of the Board is absent. Proposed Section
2.8 (Non-Executive Chairman of the Board) would be consistent with
the Mission Statement and Charter of the Depository Trust
Corporation (``DTC''), Fixed Income Clearing Corporation (``FICC''),
NSCC, and the Depository Trust and Clearing Corporation (``DTCC''),
which gives presiding authority over stockholder meetings to a
presiding director when the Non-Executive Chairman of the Board is
absent. DTC, FICC, and NSCC are subsidiaries of DTCC, each having
the same Board of Directors as DTCC. See Securities Exchange Act
Release No. 74142 (January 27, 2015), 80 FR 5188 (January 30, 2015)
(SR-FICC-2014-810, SR-NSCC-2014-811, SR-DTC-2014-812).
\11\ Notice, 83 FR at 6634.
---------------------------------------------------------------------------
The proposal also identifies the individuals to whom the Non-
Executive Chairman may assign duties. In proposed Section 3.2 (Powers
and Duties of the President and Chief Executive Officer), the Non-
Executive Chairman of the Board would have the authority to designate
powers and duties to the President and Chief Executive Officer
(``CEO'').\12\ In proposed Section 3.2 (Powers and Duties of Managing
Directors), NSCC also would add the Non-Executive Chairman of the Board
to the list of individuals who have the ability to assign powers and
duties to Managing Directors.\13\ Finally, in proposed Section 3.4
(Powers and Duties of the Secretary), the Non-Executive Chairman of the
Board (i.e., not the President and CEO) would have the authority to
assign additional powers and duties to the Secretary.\14\
---------------------------------------------------------------------------
\12\ Notice, 83 FR at 6635.
\13\ Id.
\14\ Id.
---------------------------------------------------------------------------
2. Office of the CEO
NSCC proposes to revise the By-Laws to reflect that one individual
holds the office of the President and CEO. As such, the proposal would
change the By-Laws to add the office of the CEO and combine the office
of the President and the office of the CEO into one office (President
and CEO).\15\ While current Section 3.3 (Powers and Duties of the
President) provides that the President shall be the CEO, current
Section 3.1 (General Provisions) does not include CEO in the list of
designated officer positions, though President is currently included in
this list.\16\ Therefore, NSCC proposes to revise the relevant
references in the By-Laws from President to President and CEO.\17\
---------------------------------------------------------------------------
\15\ Id.
\16\ Id.
\17\ Id.
---------------------------------------------------------------------------
Additionally, NSCC proposes to make several By-Laws revisions to
reflect the responsibilities for the consolidated role of President and
CEO.\18\ First, NSCC would delete and replace current Section 3.3
(Powers and Duties of the President) with proposed Section 3.2 (Powers
and Duties of the President and CEO).\19\ Proposed Section 3.2 (Powers
and Duties of the President and CEO) would clarify the powers and
duties associated with the role of President and CEO.\20\ For example,
in proposed Section 3.2 (Powers and Duties of the President and CEO)
the President and CEO would have general supervision over the overall
business strategy, business operations, systems, customer outreach, as
well as risk management, control, and staff functions, subject to the
direction of the Board and the Non-Executive Chairman of the Board.\21\
In addition, because the office of the Chief Operating Officer
(``COO'') would be eliminated (as described further below), the current
COO responsibility of general supervision over NSCC's operations in
current Section 3.4 (Powers and Duties of the Chief Operating Officer)
would be assigned to the President and CEO.\22\ Proposed Section 3.2
(Powers and Duties of the President and CEO) would also delineate the
authority that the Non-Executive Chairman of the Board has over the
President and CEO by stating that the latter would have such other
powers and perform such other duties as the Board or the Non-Executive
Chairman of the Board may designate.\23\
---------------------------------------------------------------------------
\18\ Id.
\19\ Id.
\20\ Id.
\21\ Id.
\22\ Id.
\23\ Id.
---------------------------------------------------------------------------
NSCC also proposes to reassign or reclassify several
responsibilities currently assigned to the President.\24\ Specifically,
the responsibility for executing the Board's policies would be assigned
to the Non-Executive Chairman of the Board rather than to the President
and CEO.\25\ Additionally, NSCC would remove the statement
``performance of any such duty by the President shall be conclusive
evidence of his power to act'' in current Section 3.3 (Powers and
Duties of the President).\26\
---------------------------------------------------------------------------
\24\ Id.
\25\ Id.
\26\ Id.
---------------------------------------------------------------------------
As mentioned above, NSCC would delete language from the By-Laws
stating that, in the absence of the Chairman of the Board, the
President shall preside at all meetings of shareholders and all Board
meetings (when present).\27\ Similarly, NSCC would delete language from
the By-Laws stating that the President and Board currently have the
authority to assign powers and duties to the Comptroller in current
Section 3.8 (Powers and Duties of the Comptroller), as discussed
below.\28\ In proposed Section 3.5 (Powers and Duties of the Chief
Financial Officer) the President and CEO and Board would have the
authority to assign duties to the Chief Financial Officer
(``CFO'').\29\
---------------------------------------------------------------------------
\27\ Id. As stated above, that power resides with the presiding
director who is elected annually by the Board. See supra note 20.
\28\ Notice, 83 FR at 6642.
\29\ Id.
---------------------------------------------------------------------------
The proposal also removes certain responsibilities from the
President. In proposed Section 3.4 (Powers and
[[Page 12976]]
Duties of the Secretary), the power to assign additional powers and
duties to the Secretary would be removed from the President and granted
to the Non-Executive Chairman of the Board.\30\
---------------------------------------------------------------------------
\30\ Id.
---------------------------------------------------------------------------
3. Office of the CFO; Office of the Comptroller
The proposal would add the office of the CFO and assign to the CFO
general supervision of the financial operations of NSCC.\31\ References
in the By-Laws to the Comptroller would be deleted because NSCC states
that it neither has a Comptroller nor plans to appoint one.\32\ In
proposed Section 3.5 (Powers and Duties of the Chief Financial Officer)
the CFO would be granted overall supervision authority over the
financial operations of NSCC, and upon request, the CFO would counsel
and advise other officers of NSCC and perform other duties as agreed
with the President and CEO (or as determined by the Board).\33\ The
proposal also provides that the CFO would report directly to the
President and CEO.\34\ Furthermore, because the Treasurer would
directly report to the CFO, proposed Section 3.6 (Powers and Duties of
the Treasurer) would provide that the Treasurer would have all such
powers and duties as generally are incident to the position of
Treasurer or as the CFO (in addition to the President and CEO and the
Board) may assign.\35\
---------------------------------------------------------------------------
\31\ Notice, 83 FR at 6636.
\32\ Id.
\33\ Id.
\34\ Id.
\35\ Id.
---------------------------------------------------------------------------
4. Office of the COO
In this proposal, NSCC would delete references in the By-Laws to
the COO because NSCC states that it no longer has a COO and has no
plans to appoint one.\36\
---------------------------------------------------------------------------
\36\ Id.
---------------------------------------------------------------------------
5. Executive Director; Vice President
In this proposal, NSCC would change the title of Vice President to
Executive Director, and update the Executive Director position's
related powers and duties to reflect the position's seniority
level.\37\ In NSCC's organizational structure, Executive Directors
report to Managing Directors.\38\ Due to this level of seniority, NSCC
proposes to remove provisions in the By-Laws that previously allowed
Vice Presidents (now, Executive Directors) to call special meetings of
shareholders, to sign share certificates, or to preside over
shareholder meetings unless specifically designated to do so by the
Board.\39\
---------------------------------------------------------------------------
\37\ Id.
\38\ Id.
\39\ Id.
---------------------------------------------------------------------------
6. Other Changes to the Powers and Duties of the Board and Certain
Other Designated Officers
In proposed Section 3.1 (General Provisions), NSCC proposes to add
a parenthetical phrase to clarify that the Board's power to appoint
other officers includes, but is not limited to, the power to appoint a
Vice Chairman of the Corporation and one or more Executive
Directors.\40\ Additionally, in current Section 3.1 (General
Provisions), NSCC proposes to clarify that neither the Secretary nor
any Assistant Secretary can hold the following offices (1) Vice
Chairman of the Corporation or (2) President and CEO.\41\
---------------------------------------------------------------------------
\40\ Id.
\41\ Id.
---------------------------------------------------------------------------
The proposal also enumerates the responsibilities of NSCC's
Managing Directors.\42\ In proposed Section 1.8 (Presiding Officer and
Secretary), Managing Directors would be removed from the list of
officers authorized to preside over a stockholders' meeting unless
specifically authorized by the Board.\43\ Similarly, in proposed
Section 2.6 (Meetings), Managing Directors would be added to the list
of officers authorized to call special meetings of the Board.\44\
---------------------------------------------------------------------------
\42\ Id.
\43\ Id.
\44\ Id.
---------------------------------------------------------------------------
NSCC also proposes to amend the By-Laws to remove specific powers
from the Treasurer and Assistant Treasurer.\45\ In current Section 5.1
(Certificates of Shares), NSCC proposes to delete the reference to
Treasurer and Assistant Treasurer from the list of authorized
signatories because NSCC expects the Secretary or Assistant Secretary
(who are each currently listed as authorized signatories) to sign any
share certificates.\46\
---------------------------------------------------------------------------
\45\ Notice, 83 FR at 6637.
\46\ Id.
---------------------------------------------------------------------------
B. Compensation of the President and CEO
Proposed Section 3.10 (Compensation of the President and CEO) would
reflect NSCC's current compensation-setting practices. Current Section
3.12 (Compensation of Officers) states that (1) the compensation, if
any, of the Chairman of the Board, and the President shall be fixed by
a majority (which shall not include the Chairman of the Board or the
President) of the entire Board of Directors, and (2) salaries of all
other officers shall be fixed by the President with the approval of the
Board and no officer shall be precluded from receiving a salary because
he is also a director.\47\ NSCC proposes to state that the Compensation
Committee of the Corporation will recommend the compensation for the
President and CEO to the Board of Directors for approval.\48\ In
addition, NSCC also proposes to delete the language stating that (1)
salaries of all other officers shall be fixed by the President with
approval of the Board, and (2) no officer shall be precluded from
receiving a salary because he is also a director.\49\ NSCC proposes to
delete compensation-related references to the Chairman of the Board
because the Non-Executive Chairman of the Board does not receive
compensation.\50\ Finally, NSCC proposes to change the title of
proposed Section 3.10 from ``Compensation of Officers'' to
``Compensation of the President and Chief Executive Officer'' because
this section would no longer address the compensation of officers other
than the President and CEO.\51\
---------------------------------------------------------------------------
\47\ Id.
\48\ Notice, 83 FR at 6637. NSCC states that it proposes this
change for consistency with the DTCC/DTC/FICC/NSCC Compensation and
Human Resources Committee Charter. Id.
\49\ Id.
\50\ Id.
\51\ Notice, 83 FR at 6644.
---------------------------------------------------------------------------
C. Technical Changes and Corrections
NSCC proposes technical changes and/or corrections to the By-Laws
for clarity and readability, as described below.\52\
---------------------------------------------------------------------------
\52\ Id.
---------------------------------------------------------------------------
1. Statutory References and Requirements
NSCC would delete direct statutory references from the By-Laws.\53\
NSCC states that it would make this change to have the By-Laws remain
consistent and accurate despite any changes to a specifically cited
statute.\54\
---------------------------------------------------------------------------
\53\ Id.
\54\ Id.
---------------------------------------------------------------------------
2. Audit Committee
NSCC proposes to revise proposed Section 2.11 (Audit Committee) to
have the description of its Audit Committee conform to the description
of the Audit Committee in the by-laws of FICC.\55\
---------------------------------------------------------------------------
\55\ Id.
---------------------------------------------------------------------------
3. Other Technical Changes and Corrections
NSCC proposes to make additional technical and grammatical changes
to address (1) typographical errors, (2) section numbering, (3)
grammatical
[[Page 12977]]
errors, (4) heading consistency, and (5) gender references.\56\
---------------------------------------------------------------------------
\56\ Notice, 83 FR at 6637-38.
---------------------------------------------------------------------------
D. Proposed Changes to the Rules
NSCC proposes to add an addendum (``Addendum V'') to the Rules.\57\
NSCC proposes that Addendum V would be entitled ``By-Laws and Restated
Certificate of Incorporation'' and would indicate that the By-Laws and
Certificate of Incorporation are incorporated into the Rules by
reference.\58\
---------------------------------------------------------------------------
\57\ Notice, 83 FR at 6638.
\58\ Id.
---------------------------------------------------------------------------
II. Discussion and Commission Findings
Section 19(b)(2)(C) of the Act directs the Commission to approve a
proposed rule change of a self-regulatory organization if it finds that
such proposed rule change is consistent with the requirements of the
Act and rules and regulations thereunder applicable to such
organization.\59\ The Commission believes the proposal is consistent
with Act, specifically Section 17A(b)(3)(F) of the Act and Rules 17Ad-
22(e)(1) and, in part, (2) under the Act.\60\
---------------------------------------------------------------------------
\59\ 15 U.S.C. 78s(b)(2)(C).
\60\ 15 U.S.C. 78q-1(b)(3)(F); 17 CFR 240.17Ad-22(e)(1) and (2).
---------------------------------------------------------------------------
A. Section 17A(b)(3)(F) of the Act
Section 17A(b)(3)(F) of the Act requires, in part, that the rules
of a clearing agency, such as NSCC, be designed to protect the public
interest.\61\ As discussed above, the proposed rule change would make a
number of updates to the By-Laws.
---------------------------------------------------------------------------
\61\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------
First, NSCC proposes to revise NSCC's description of the titles and
responsibilities of its Board and senior management to match NSCC's
current corporate structure. These changes would help the Board, as
well as NSCC's management, employees, and members, understand which
officer or office is responsible for each of NSCC's executive-level
functions.
Second, the proposal would update the compensation-setting section
of the By-Laws to reflect the Compensation Committee Charter practice,
as well as to reflect that the Non-Executive Chairman of the Board
would not receive compensation. The proposal's increased clarity around
compensation-setting would better inform NSCC stakeholders and the
general public about how NSCC sets the level of compensation for its
highest-level executive (the President and CEO) and that the Non-
Executive Chairman does not draw a salary.
Third, NSCC's proposed technical changes and corrections to its By-
Laws would enhance the clarity, transparency, and readability of NSCC's
organizational documents. In this way, the proposal would better enable
the Board, as well as NSCC's management, employees, and members, to
understand their respective authorities, rights, and obligations
regarding NSCC's clearance and settlement of securities transactions.
Finally, NSCC's proposed addendum would incorporate the By-Laws and
Certificate of Incorporation into the Rules. This change would increase
the clarity and transparency of NSCC's organizational documents by
integrating the By-Laws and the Certificate of Incorporation into the
Rules, to which all NSCC members are subject and have access.
Governance arrangements are critical to the sound operation of
clearing agencies.\62\ Specifically, clear and transparent governance
documents promote accountability and reliability in the decisions,
rules, and procedures of a clearing agency.\63\ Clear and transparent
governance documents also provide interested parties, including owners,
members, and general members of the public, with information about how
a clearing agency's decisions are made and what the rules and
procedures are designed to accomplish.\64\ Further, the decisions,
rules, and procedures of a clearing agency are important, as they can
have widespread impact, affecting multiple market members, financial
institutions, markets, and jurisdictions.\65\
---------------------------------------------------------------------------
\62\ Securities Exchange Act Release No. 71699 (May 21, 2014),
79 FR 29508 (May 22, 2014) (``Covered Clearing Agency Standards
Proposing Release'') at 29521.
\63\ Securities Exchange Act Release No. 64017 (March 3, 2011),
76 FR 14472 (March 16, 2011) at 14488.
\64\ Id.
\65\ Covered Clearing Agency Standards Proposing Release, 79 FR
at 29521.
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As stated above, the proposed rule change would provide NSCC
stakeholders with a better understanding of how NSCC makes decisions
that could ultimately affect the financial system. Such transparency
helps ensure that NSCC reliably makes decisions and follows clearly
articulated policies and procedures. Accordingly, the Commission finds
that the proposed rule change is designed to enhance the clarity and
transparency of NSCC's organizational documents, which would help
protect the public interest, consistent with Section 17A(b)(3)(F) of
the Act.\66\
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\66\ 15 U.S.C. 78q-1(b)(3)(F).
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B. Rule 17Ad-22(e)(1) Under the Act
Rule 17Ad-22(e)(1) under the Act requires a covered clearing agency
\67\ to establish, implement, maintain, and enforce written policies
and procedures reasonably designed to provide for a well-founded,
transparent, and enforceable legal basis for each aspect of its
activities in all relevant jurisdictions.\68\
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\67\ A ``covered clearing agency'' means, among other things, a
clearing agency registered with the Commission under Section 17A of
the Exchange Act (15 U.S.C. 78q-1 et seq.) that is designated
systemically important by the Financial Stability Oversight Counsel
(``FSOC'') pursuant to the Payment, Clearing, and Settlement
Supervision Act of 2010 (12 U.S.C. 5461 et seq.). See 17 CFR
240.17Ad-22(a)(5)-(6). On July 18, 2012, FSOC designated NSCC as
systemically important. U.S. Department of the Treasury, ``FSOC
Makes First Designations in Effort to Protect Against Future
Financial Crises,'' available at https://www.treasury.gov/press-center/press-releases/Pages/tg1645.asp. Therefore, NSCC is a covered
clearing agency.
\68\ 17 CFR 240.17Ad-22(e)(1).
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As discussed above, the proposed rule change would update the By-
Laws by (1) updating NSCC's description of the titles and
responsibilities of its Board and senior management to match NSCC's
current corporate structure, (2) documenting NSCC's current
compensation-setting process, and (3) enacting technical corrections to
increase readability. The proposed rule change would also add an
addendum to the Rules to incorporate the By-Laws and the Certificate of
Incorporation by reference.
The proposed changes are designed to help ensure that the By-Laws
better reflect NSCC's governance practices, as well as to organize
NSCC's organizational documents, in a clear, transparent, and
consistent manner. This increased transparency would help convey to
NSCC's stakeholders, and the public generally, a key legal basis for
the activities of the highest levels of NSCC's leadership described in
the By-Laws. Therefore, the Commission finds that the proposed rule
change is designed to help ensure that NSCC's organizational documents
remain well-founded, transparent, and legally enforceable in all
relevant jurisdictions, consistent with Rule 17Ad-22(e)(1) under the
Act.\69\
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\69\ Id.
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C. Rule 17Ad-22(e)(2)(i) and (v) Under the Act
Rule 17Ad-22(e)(2)(i) and (v) under the Act requires that NSCC
establish, implement, maintain and enforce written policies and
procedures reasonably designed to provide for governance arrangements
that, among other things, (1) are clear and
[[Page 12978]]
transparent and (2) specify clear and direct lines of
responsibility.\70\
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\70\ 17 CFR 240.17Ad-22(e)(2)(i) and (v).
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As described above, NSCC proposes a number of changes that would
provide clarity and transparency. NSCC proposes to revise By-Laws
provisions that were outdated or incorrect. Specifically, the proposed
changes to the titles and offices (and their related powers and duties)
would provide clarity and transparency because they would clearly set
forth NSCC's current organizational structure, including the lines of
responsibility of various officers and the Board. The proposed changes
relating to compensation-setting would also give clarity and
transparency by (1) accurately reflecting the process that is followed
pursuant to the Compensation Committee Charter, and (2) clarifying that
the Non-Executive Chairman of the Board does not receive compensation.
Finally, the proposed technical changes and corrections would raise the
clarity and transparency of the By-Laws by removing grammatical and
typographical errors. Additionally, NSCC also proposes changes to its
Rules to provide clarity and transparency. Specifically, the proposed
changes would create clarity and transparency by integrating the By-
Laws and the Certificate of Incorporation into one document, the Rules
(to which all NSCC members are subject and have access).
For these reasons, the Commission finds that the proposed rule
change is designed to enhance clarity and transparency in NSCC's
governance arrangements, as well as to specify clear and direct lines
of responsibility for various officer positions and the Board within
NSCC's organizational structure, consistent with Rule 17Ad-22(e)(2)(i)
and (v) under the Act.\71\
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\71\ Id.
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III. Conclusion
On the basis of the foregoing, the Commission finds that the
proposal is consistent with the requirements of the Act, in particular
the requirements of Section 17A of the Act \72\ and the rules and
regulations thereunder.
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\72\ 15 U.S.C. 78q-1.
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It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
that proposed rule change SR-NSCC-2018-001 be, and hereby is,
approved.\73\
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\73\ In approving the proposed rule change, the Commission
considered the proposals' 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.\74\
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\74\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-06030 Filed 3-23-18; 8:45 am]
BILLING CODE 8011-01-P
