U.S. SEC proposes new rules for clearing houses

The U.S. Securities and Exchange Commission (SEC) on Monday proposed new rules aimed at preventing conflicts of interest in management and governance of clearing houses.

Clearing houses provide essential plumbing for financial markets, ensuring that securities or derivatives trades are completed, even if one side of a transaction goes bust.

Under the SECs proposal, registered clearing houses would be required to disclose more details on board composition, independent directors, and nominating and risk management committees, among other details, the agency said.

I think these rules would help to build more transparent and reliable clearing houses, SEC Chair Gary Gensler said in a statement.

“This in turn would help ensure our markets are more resilient, protecting investors and building trust in our markets,” Gensler said.

The plan would replace two related measures proposed following the 2009-2010 global financial crisis, but which were never adopted.

Specifically, the SECs plan would require clearing houses identify, mitigate or eliminate conflicts of interest involving directors or senior managers, and also to document such actions.

It would also require such firms to implement policies and procedures that obligate directors to report conflicts of interest, among other details.

The SECs move comes as part of efforts by the Biden administration to see all aspects of the financial industry boost environmental, social and governance disclosures.