The U.S. Securities and Exchange Commission (SEC) recently approved a regulation aimed at mitigating potential conflicts of interest at financial intermediaries, often referred to as clearinghouses. The contents of the new regulation include the establishment of a minimum number of independent directors and the creation of essential rules regarding firms’ relationships with contractors.
This mandate is one step of several taken by the SEC with a focus on eliminating possible conflicts of interest in these financial institutions. Clearinghouses have always served a substantial role in the financial world as they act as intermediaries in financial transactions, ensuring all parties involved in a deal follow the agreed upon terms.
Historically, the operations of these clearinghouses have witnessed instances of conflicts of interest especially around firms’ relationships with contractors. These new rules will ensure a baseline number of independent directors, who lack ties to the company, are part of each clearinghouse. This separation can aid in holding the company to a higher standard of operation.
For more details on these regulations and their potential impact on clearing agencies, you can read the original report on Law360.