The sole registered clearing agency for exchange listed option contracts agreed to pay $20 Million in fines to the SEC and the CFTC for failing to adopt and implement reasonable policies and procedures. The regulators allege that the clearing agency, an SRO designated as a systemically important financial market utility under the Dodd-Frank Act, did not adopt or enforce reasonable policies and procedures related to margin, credit exposure, risk management, and information security. Also, the firm failed to obtain required approval for changes in core risk management policies. In addition to the fines, the respondent agreed to retain an independent compliance auditor and implement a series of board and executive level risk management oversight mechanisms.
The regulators can impose significant fines and penalties for failures to implement required policies and procedures without alleging any underlying loss or harm to investors. The failure to implement required risk management and compliance policies can itself serve as the predicate for an enforcement action.