[Federal Register Volume 79, Number 70 (Friday, April 11, 2014)]
[Notices]
[Pages 20272-20273]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-08128]
[[Page 20272]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-71893; File No. SR-OCC-2014-08]
Self-Regulatory Organizations; The Options Clearing Corporation;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Provide Certain Enhancements and Clarifications With Respect to OCC's
Indemnification of Its Directors, Officers and Other Personnel
April 7, 2014.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on April 1, 2014, The Options Clearing Corporation (``OCC'') filed with
the Securities and Exchange Commission (``Commission'') the proposed
rule change as described in Items I and II below, which Items have been
prepared by the clearing agency. OCC filed the proposal pursuant to
Section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(6) thereunder.\4\
The Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(6). As required by Rule 19b-4(f)(6)(iii)
of the Act, OCC has given the Commission written notice of its
intent to file the proposed rule change, along with a brief
description and text of the proposed rule change, at least five
business days prior to the date of filing of the proposed rule
change, or such sorter time as designated by the Commission.
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I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
This proposed rule change by OCC would amend OCC's By-Laws to
provide certain enhancements and clarifications with respect to OCC's
indemnification of its directors, officers and other personnel.
II. Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
In its filing with the Commission, OCC included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. OCC has prepared summaries, set forth in sections (A),
(B), and (C) below, of the most significant aspects of these
statements.
(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
OCC is proposing to modify its By-Laws to provide certain
enhancements and clarifications with respect to OCC's indemnification
of its directors, officers and other personnel and generally bring the
indemnification provisions in OCC's By-Laws in line with current best
practices for Delaware corporations in an effort to be able to continue
to attract qualified individuals to be directors and officers of OCC.
The proposed changes would include mandatory advancement of expenses to
an indemnified party and certain other provisions that are now
frequently included in the by-laws of a Delaware business corporation.
The proposed changes also include certain permissive provisions
regarding indemnification and related matters that are implied within
OCC's power and authority under the Delaware General Corporation Law
(``DGCL'') and OCC's charter and By-Laws, but not currently stated in
the By-Laws. OCC proposes to specifically incorporate these provisions
into the By-Laws for the purpose of including a comprehensive statement
of OCC's policies for indemnification and related matters in a single
location.
The proposed changes would provide a number of enhancements to the
existing indemnification provisions in OCC's By-Laws. First, OCC
proposes to revise Section 1 of Article X of the By-Laws to (i) add
mandatory advancement of expenses to directors and officers who have
indemnification rights; (ii) require an undertaking to repay advanced
expenses if the indemnified person is ultimately not entitled to
indemnity; (iii) clearly state that the rights of a director or officer
inure to the benefit of his or her heirs and representatives; and (iv)
exclude from indemnification actions initiated by the director or
officer, unless authorized by OCC's board of directors. Further,
proposed revisions to Section 2 would remove a clause relating to
amendment or repeal of the indemnification provisions in the By-Laws,
because proposed Section 2, together with proposed Section 8 described
below, would protect potentially indemnified parties from having their
rights retroactively adversely altered.
OCC is also proposing to add a number of new sections regarding
indemnification and related matters to Article X of its By-Laws.
Specifically, new proposed Section 3 would, among other things, make
clear that OCC can purchase insurance coverage against any liability
asserted against current and former directors and officers whether or
not OCC would have the power to indemnify the person against such
liability. New proposed Section 4 would replace existing Section 3
relating to indemnification of persons other than directors and
officers of OCC. While existing Section 3 is limited to employees and
agents of OCC, proposed Section 4 would permit OCC to indemnify any
person other than directors and officers as approved by OCC's board of
directors. New proposed Section 5 would give an indemnified party the
express right to recover unpaid indemnification or expense claims and
would require that OCC pay the indemnified party's costs of prosecuting
such right if the indemnified party is successful. New proposed Section
6 would provide an ``offset'' to OCC if an OCC indemnified person is
serving in some capacity at another entity at OCC's request and that
indemnified person collects from the other entity. The purpose of the
proposed offset is to prevent the indemnified person from being
compensated twice for the same situation.
OCC is proposing to add two new sections to Article X of its By-
Laws relating to the structure of the indemnification provisions
therein. First, proposed new Section 7 would expressly state that the
indemnification rights set forth in Article X of OCC's By-Laws are non-
exclusive, but would not otherwise expand or contract the substance of
those provisions. Second, proposed new Section 8 would prohibit any
amendments or changes to Article X that would adversely affect the
rights of current or former directors or officers by requiring that any
such amendment operate only prospectively.
OCC believes the proposed rule change is consistent with Section
17A(b)(3)(F) of the Act,\5\ and the rules and regulations thereunder,
including Rule 17Ad-22.\6\ By enhancing the indemnification provisions
in OCC's By-Laws such that OCC can continue to attract and retain
qualified directors, officers and other personnel, and these
individuals can effectively perform their duties, the proposed rule
change would foster cooperation and coordination with persons engaged
in the clearance and settlement of securities transactions, and
generally would provide for the prompt and accurate clearance and
settlement of securities transactions and the protection of securities
investors and the public interest.\7\ Additionally, bringing the
indemnification provisions in OCC's By-
[[Page 20273]]
Laws in line with current best practices for Delaware corporations as
well as clarifying certain of those provisions furthers OCC's goal of
maintaining written policies and procedures that provide for a well-
founded, transparent and enforceable legal framework for its activities
and therefore is consistent with Rule 17Ad-22(d)(1).\8\ The proposed
rule change is not inconsistent with the existing rules of OCC,
including any other rules proposed to be amended.
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\5\ 15 U.S.C. 78q-1(b)(3)(F).
\6\ 17 CFR 240.17Ad-22.
\7\ 15 U.S.C. 78q-1(b)(3)(F).
\8\ 17 CFR 240.17Ad-22(d)(1).
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(B) Clearing Agency's Statement on Burden on Competition
OCC does not believe that the proposed rule change would impose any
burden on competition. Changes to the rules of a clearing agency may
have an impact on the participants in a clearing agency, their
customers and the markets that the clearing agency serves. This
proposed rule change affects current and future OCC directors and
officers, and OCC believes that the proposed modifications would not
disadvantage or favor any particular user in relationship to another
user because the proposed modifications relate to internal corporate
matters at OCC and would not impose any burdens on users and
prospective users.
For the foregoing reasons, OCC believes that the proposed rule
change is in the public interest, would be consistent with the
requirements of the Act applicable to clearing agencies, and would not
impose a burden on competition.
(C) Clearing Agency's Statement on Comments on the Proposed Rule Change
Received From Members, Participants, or Others
Written comments on the proposed rule change were not and are not
intended to be solicited with respect to the proposed rule change and
none have been received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, if consistent with
the protection of investors and the public interest, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \9\ and Rule 19b-
4(f)(6) thereunder.\10\
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\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ 17 CFR 240.19b-4(f)(6). Notwithstanding the foregoing, OCC
stated in its filing that implementation of this rule change will be
delayed until this rule change is deemed certified under CFTC
Regulation Sec. 40.6.
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) of the Act \11\ to determine whether the proposed
rule should be approved or disapproved.
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\11\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-OCC-2014-08 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-OCC-2014-08. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549 on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of OCC and on OCC's
Web site (http://www.theocc.com/about/publications/bylaws.jsp). All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-OCC-2014-08 and should be
submitted on or before May 2, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-08128 Filed 4-10-14; 8:45 am]
BILLING CODE 8011-01-P