SEC Fines The Options Clearing Corporation $17 Million for Compliance Violations
The Securities and Exchange Commission (SEC) today announced that the Options Clearing Corporation (OCC), located in Chicago, has agreed to undertake a number of remedial measures and pay $17 million in penalties to settle charges against it for failing to comply with its SEC-approved Stress Testing and Clearing Fund Methodology rule from October 2019 to May 2021. OCC is the sole registered clearing agency for exchange listed option contracts in the US. According to the SEC’s order, the failure was due to OCC not properly establishing, implementing, and enforcing policies and procedures to manage certain operational risks. The SEC’s order also revealed that OCC failed to abide by its margin methodology, margin policy, and stress testing and clearing fund methodology related to wrong way risk and holiday margin. The SEC further found that OCC did not provide timely notification to the SEC of this failure. As part of the settlement, OCC will revise its model validation policies and procedures, enhance its approach to risk data governance, implement changes to its control environment, which includes processes, procedures, and controls, and conduct appropriate training on the changes. The SEC appreciates the assistance of the Commodity Futures Trading Commission and their investigation was conducted by Richard G. Stoltz and Charles J. Kerstetter from the Chicago Regional Office and supervised by Kathryn A. Pyszka and Daniel Gregus.