[Federal Register Volume 78, Number 150 (Monday, August 5, 2013)]
[Notices]
[Pages 47449-47450]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-18761]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-70076; File No. SR-OCC-2013-09]
Self-Regulatory Organizations; The Options Clearing Corporation;
Order Approving Proposed Rule Change, as Modified by Amendment No. 1,
To Separate the Powers and Duties Currently Combined in the Office of
OCC's Chairman Into Two Offices, Chairman and President, and Create an
Additional Directorship To Be Occupied by the President
July 30, 2013.
I. Introduction
On June 4, 2013 The Options Clearing Corporation (``OCC'') filed
with the Securities and Exchange Commission (``Commission'') the
proposed rule change SR-OCC-2013-09 pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4
thereunder.\2\ On June 10, 2013, OCC filed Amendment No. 1 to the
proposed rule change.\3\ The proposed rule change, as modified by
Amendment No. 1, was published for comment in the Federal Register on
June 21, 2013.\4\ The Commission received no comment letters. For the
reasons discussed below, the Commission is granting approval of the
proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Amendment No. 1 corrects an administrative oversight related
to a sentence reference in OCC's Certificate of Incorporation.
\4\ Release No. 34-69771 (June 17, 2013), 78 FR 37640 (June 21,
2013).
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II. Description
The purpose of this rule change is to provide for separation of the
powers and duties currently combined in the office of OCC's Chairman of
the Board of Directors into two offices, Chairman \5\ and President,
and create an additional directorship to be occupied by the President.
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\5\ Pursuant to Article IV, Section 6, of OCC's By-Laws, the
Chairman of the Board is also the Executive Chairman.
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Proposal Overview
In the course of OCC's review of the structure of the Board of
Directors, OCC determined that dividing the powers and duties of the
Chairman of the Board into two positions, Chairman and President, would
enhance oversight of OCC management by making the Chairman independent
of most management functions. Pursuant to the rule change, the Chairman
will be responsible for oversight of: (i) The control functions of OCC,
including enterprise risk management, internal audit and compliance;
(ii) external affairs; and (iii) presiding at all meetings of OCC's
Board of Directors and OCC's stockholders. The President will report to
the Chairman and be responsible for all aspects of OCC's business that
do not report directly to the Chairman. Under OCC's rule change, OCC's
President, who will also serve as Chief Executive Officer, will focus
on the effectiveness of OCC's day-to-day operations, as well as
strategic initiatives for the future.
OCC expects that the Chairman's direct oversight of control
functions will increase independence by limiting management's influence
over such functions. In addition, OCC notes that the significance of
these control functions for a clearing agency warrants full-time
oversight, which can only be provided by an executive of OCC.
To reflect the above changes in its governance structure, OCC will
revise Section 7 of Article III of its By-Laws to include OCC's
President as a Management Director, along with OCC's Chairman.\6\ OCC
will also revise Article IV of its By-Laws to include references to the
President in certain provisions governing OCC's officers.\7\ OCC will
also amend Articles IV and V of its Certificate of Incorporation to
reflect the existence of an additional Management Director. Finally,
OCC will also amend Sections 2 and 3 of the Stockholders Agreement to
provide for the election of the President, in addition to the Chairman,
as a Management Director.
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\6\ Sections 1, 7 and 12 of Article III will also be amended to
reflect the existence of an additional Management Director.
Furthermore, OCC will amend Section 15 of Article III to grant the
President the same authority to act in the case of an emergency as
the Chairman and, consequently, OCC will remove the President as one
of the ``Designated Officers'' to whom such authority would devolve
if certain enumerated officers are unavailable.
\7\ The amended Section 1 of Article IV will include the
President, along with the Chairman, as an officer required to be
elected by the Board of Directors. Section 8 of Article IV, as
amended, will no longer give the Board the option of electing a
President, but will make such office required. Sections 6 and 8 of
Article IV will be amended to specify the duties of the Chairman and
President, respectively. Sections 2, 3, and 13 of Article IV will be
amended to give the President power, like the Chairman, to appoint
and remove certain officers and agents to carry out the functions
assigned to him and may determine the salaries of these appointees
and agents. Sections 7 and 9 will be amended to add references to
the President, in addition to the Chairman, when referencing the
highest-ranking officers of OCC.
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Implementation Timeframe
OCC will notify members of the date on which it intends to
implement the rule change through the posting of an information memo on
the OCC Web site. The change will not take effect until such date OCC
designates as the date of implementation. OCC expects to implement the
rule change no later than December 31, 2013.
III. Discussion
Section 19(b)(2)(C) of the Act \8\ 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 the rules and regulations thereunder
applicable to such organization. Section 17A(b)(3)(A) of the Act \9\
requires that a clearing agency that is registered with the Commission
be organized and have the capacity to be able to, among other things,
facilitate the prompt and accurate clearance and settlement of
securities transactions.
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\8\ 15 U.S.C. 78s(b)(2)(C).
\9\ 15 U.S.C. 78q-1(b)(3)(A).
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The Commission finds that the rule change is consistent with
Section 17A(b)(3)(A) of the Act \10\ because by separating the powers
and duties currently combined in the office of OCC's Chairman into two
offices, the rule change should enhance oversight of management by
ensuring that the Chairman is independent of most management functions
and that the separation of powers and duties over OCC operations is not
overly concentrated in the hands of a single individual, thereby
promoting greater accountability of management to the Board of
Directors. In so doing, OCC's rule change should improve its corporate
governance structure and provide for an appropriate checks and balance
between oversight by OCC's Board of Directors and OCC management of
day-to-day operations, which in turn, should facilitate the prompt and
accurate clearance and settlement of securities transactions.
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\10\ Id.
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[[Page 47450]]
IV. Conclusion
On the basis of the foregoing, the Commission finds that the
proposal is consistent with the requirements of the Act and in
particular with the requirements of Section 17A of the Act \11\ and the
rules and regulations thereunder.
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\11\ 15 U.S.C. 78q-1.
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It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\12\ that the proposed rule change (File No. SR-OCC-2013-09) be and
hereby is APPROVED.\13\
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\12\ 15 U.S.C. 78s(b)(2).
\13\ 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.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-18761 Filed 8-2-13; 8:45 am]
BILLING CODE 8011-01-P