SEC Votes to Propose Changes in SRO Governance and Issue Related Concept Release


Washington, D.C., Nov. 9, 2004 - The Securities and Exchange Commission at an open meeting today voted to propose new rules and amend existing rules and forms under the Securities Exchange Act of 1934 relating to the governance, transparency, oversight, and ownership of self-regulatory organizations (SROs), and to issue a concept release examining the efficacy of self-regulation.

Rulemaking Proposal Highlights

A summary of the rulemaking proposals follows:

  • Governance Proposal. This proposal would require SROs to adopt specified baseline governance standards, including a majority independent board and fully independent nominating, governance, audit, compensation, and regulatory oversight committees. It also would require each SRO to take steps to separate its regulatory function from its business operations.
  • Transparency Proposal. This proposal would require SROs to publicly disclose, and update at least annually, specified information about their operation and structure, including their governance processes, regulatory programs, financial condition, and ownership.
  • SRO Reporting Proposal. This proposal would require SROs to submit quarterly and annual reports to the Commission containing specified information on the operation of their regulatory programs, including their examination, investigation, and enforcement activities. This information is intended to support the Commission's SRO inspections program.
  • SRO Ownership Proposal. This proposal would restrict the ownership and voting levels of members that are broker-dealers to no more than 20% with respect to the SRO or any separate facility. It also would require SROs and their members to report to the Commission information about any significant accumulations of SRO ownership interests and voting power.
  • SRO Self-Listing Proposal. This proposal would require SROs to comply with additional reporting and other requirements in the event they list or trade their own or an affiliate's securities, or the securities of a facility or an affiliate of a facility.

Concept Release

The concept release will request public comment on a variety of issues relating to the efficacy of the self-regulatory system, including, the inherent tensions in this model and its strengths and weaknesses. The concept release also will request public comment on the advisability of implementing enhancements to the current SRO system or, alternatively, pursuing an alternative regulatory model.

Comments on the proposed rules and rule amendments should be received by the Commission within 45 days of publication in the Federal Register. The comment period for the concept release will be 90 days from the date of its publication in the Federal Register.


Last modified: 11/9/2004