OCC settlements on regulatory matters with SEC and CFTC

OCC, the world’s largest equity derivatives clearing organization, released the below statement in response to a settlement reached with the U.S. Securities and Exchange Commission (SEC) and the U.S. Commodity Futures Trading Commission (CFTC) regarding allegations that OCC failed to comply with certain SEC and CFTC regulations.

The SEC and CFTC both considered OCC’s cooperation and remediation efforts in reaching their settlement with the company. The SEC noted that OCC developed remediation plans that have been provided to the Commission staff and has already obtained SEC approval to enhance the company’s margin policy, incorporate stress testing and liquidation costs into its clearing fund and margin methodologies, respectively, among other approvals. The CFTC specifically noted that “OCC developed remediation plans to bring OCC into compliance with [clearing agency] Core Principles and Regulations.”

OCC Chief Executive Officer John Davidson said, “We take our responsibility to promote the stability and integrity of markets seriously, and we are committed to operating as a resilient clearinghouse and maintaining the highest standards of regulatory compliance throughout our organization. Our commitment is reflected in the progress we have made as most of the compliance remediation is now complete and any remaining actions are on a path to be completed expeditiously. We look forward to continuing to work constructively with our regulators as our transformation continues.”

In recognizing OCC’s cooperation and remediation efforts, the SEC’s Order states that, “[a]t the direction of its Executive Chairman and Board of Directors, OCC has replaced many of its senior executives – including hiring a new Chief Executive Officer, Chief Operating Officer, Head of Financial Risk Management, Chief Information Officer, Chief Security Officer, and heads of control functions – and increased its expenditures and headcount in the areas of risk management, compliance, legal, and information technology.”

Executive Chairman Craig Donohue said, “On behalf of OCC’s Board of Directors, I want to thank our regulators for their support and cooperation in resolving these matters. For the past five years, OCC has been engaged in a comprehensive transformation effort to strengthen our financial resiliency, our people, our compliance processes, and our technology to meet new and heightened regulatory obligations and to better serve market participants and the investing public. I, along with our Board of Directors, believe we have the right leaders in place in John Davidson, Scot Warren and our new management team to successfully move OCC forward in our role as a Systemically Important Financial Market Utility.”

Donohue added, “Our OCC colleagues are to be commended as they have accomplished a great deal during the last several years. The Orders contain additional undertakings that OCC will address. We are very supportive of those undertakings and believe they will strengthen OCC. We will continue to work tirelessly as a team to continue to earn the trust and confidence of our clearing member firms, participating exchanges, business partners, and regulators. We also will continue to strive for excellence as we fulfill our mission to serve as the foundation for secure markets.”

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