As part of its overall transformation efforts, OCC has filed its proposed Capital Management Policy with the SEC. Here is a link to the filing https://www.theocc.com/components/docs/legal/rules_and_bylaws/sr_occ_19_007.pdf
Approved by OCC’s Board of Directors on May 13, 2019, the Capital Management Policy details the principles used to identify, monitor and manage OCC’s necessary capital level. A draft filing describing the Policy was provided to the SEC on May 20. As required by regulation, OCC maintains high quality and sufficiently liquid net assets funded by equity to cover potential general business losses and to provide for continued operations and services as a going concern if losses materialize under a range of scenarios, including adverse market conditions.
The purpose of the proposed Policy is to govern the maintenance of capital at the level necessary for OCC to meet its regulatory obligations and to serve its clearing members and the public interest. In drafting the proposed Policy, OCC sought to address the concerns raised in the SEC’s disapproval order on the previous capital plan: the dividend and the associated rate of return are not part of the Policy and no further stockholder dividend is contemplated.
With the return of stockholder-invested capital, the approach under the proposed Policy will allow OCC to be funded through its usership. The new approach to capital management also addresses these core elements:
- Provides OCC’s approach to determining clearing fees, inclusive of an operating margin based on the variance in daily volume;
- Adds a working capital line of credit;
- Identifies the considerations made in determining OCC’s level of target capital on an annual basis;
- Describes how OCC will periodically monitor its capital levels to identify whether OCC’s capital has fallen or is in danger of falling below defined thresholds triggering further action; and
- Establishes a replenishment plan for accessing additional capital should OCC’s equity capital fall below those defined thresholds.