Options Clearing Corp. (OCC) reportedly to pay $20 Million in Penalties

According to a press announcement on Sept. 4, 2019,the Securities and Exchange Commission and the Commodity Futures Trading Commission announced that the Options Clearing Corp. (OCC) will reportedly pay $20 million in penalties to settle charges that it allegedly failed to implement policies to manage certain risks as required by U.S. laws and SEC and CFTC rules.

According to the orders, the Chicago-based Options Clearing Corporation purportedly failed to establish and enforce policies and procedures involving financial risk management, operational requirements, and information-systems security.

The SEC also alleges that the firm changed policies on core risk management issues without obtaining required SEC approval.

OCC was designated in 2012 as a systemically important financial market utility, as the U.S.’s sole registered clearing agency for exchange-listed option contracts on equities.  This reportedly makes it subject to enhanced regulation and transparency regarding its risk management systems. Disruption to OCC’s operations might be costly not only for itself and its members, but other market participants or the broader financial system.

Without admitting or denying the findings, Options Clearing Corporation purportedly agreed to pay a combined $20 million in penalties ($15 million under the SEC’s order and $5 million under the CFTC’s order) and hire an independent compliance auditor to assess its remediation of the violations and subsequent compliance efforts.

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