The Securities and Exchange Commission (SEC) announced that The Options Clearing Corporation (OCC) will undertake remedial efforts and pay $17 million in penalties to settle charges that it failed to comply with its SEC-approved Stress Testing and Clearing Fund Methodology rule during certain times between October 2019 and May 2021.
According to the SEC’s order, Chicago-based OCC’s failure to implement and comply with its own rule was the result of its failure to properly establish, implement, and enforce written policies and procedures reasonably designed to manage certain operational risks.
“OCC is the sole registered clearing agency for exchange listed option contracts in the United States,” said SEC chair Gary Gensler, in a statement. “Today’s action by the SEC reinforces the importance of OCC’s compliance with risk management policies and procedures designed to meet its obligations to our financial system.”
In addition to the $17 million penalty, OCC has undertaken several remedial measures, including to revise its model validation policies and procedures; enhance its approach to risk data governance; implement changes to elements of its control environment, including processes, procedures, and controls; and conduct appropriate training on the changes.
In a separate announcement, the Commodity Futures Trading Commission (CFTC) issued an order simultaneously filing and settling charges against OCC. The order finds the respondent failed to establish, implement, maintain and enforce certain policies and procedures reasonably designed to manage the operational risks related to its automated systems.
Without admitting or denying the CFTC’s findings, OCC agreed to pay a $5 million penalty for violations of the Commodity Exchange Act and CFTC regulations and be subject to undertakings relating to remediation.