SEC Open Meeting: SRO Changes

By: Cydney Posner

Today, the SEC voted to propose new rules relating to the governance and transparency of SROs and to publish for public comment a Concept Release relating to the efficacy and central features of the current SRO system, including specified enhancements to the current SRO system as well as possible alternative regulatory models. The proposal includes:

• New rules that would require SROs to implement minimum governance standards, including a majority independent board, fully independent Nominating, Governance, Audit, Compensation and Regulatory Oversight Committees, and the separation of an SRO’s regulatory functions from its market operations and other business interests.
• Amendments that would require the SROs to provide to the SEC and to publicly disclose more current information about their operation and structure, including their governance processes, regulatory programs, financial condition and ownership.
• New rules requiring SROs to file with the SEC quarterly and annual reports containing specified information on the operation of their regulatory programs, including their examination, investigation and enforcement activities.
• New rules that would require SROs to restrict ownership and voting levels of individual members to no more than 20% and to report significant accumulations of ownership by any person. The rules would also require SRO members to report significant ownership interest information.
• New rules imposing reporting and notification requirements on an SRO that lists or trades its own securities or those of its trading facilities or affiliates.
• Amendments that which would codify the current practice of the SROs to keep at least one copy of their required books and records in the US.

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