SEC Sets Effective and Compliance Dates for Rules on Clearing Agency Governance

The SEC set an effective date of February 5, 2024 for amendments establishing new governance requirements aimed at reducing the likelihood that conflicts of interest influence a clearing agency's board of directors.

As previously covered, the specific requirements require that:

• a majority of the board must be made up of independent directors, or 34 percent, if a majority of the voting rights are held by clearing firms;
• each subcommittee of the board must have an independent director;
• the clearing agency must have standards that would serve to disqualify certain persons from becoming directors;
• the clearing agency must have a nominating and vetting process for members of the board;
• the board of directors must have a risk management subcommittee;
• the clearing agency must implement policies that (i) identify and mitigate conflicts of interest and (ii) mandate directors to report potential conflicts of interest in a timely manner;
• the clearing agency must implement policies to manage risks associated with service providers used to support the delivery of clearance or settlement functionality; and
• the clearing agency board must establish policies to solicit, consider and document stakeholder input regarding material developments in the clearing agency’s risk management and operations.

The compliance date is December 5, 2024, except for the independent directors, who must comply by December 5, 2025.