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Regulations

Appeals court tells SEC to review Options Clearing Corp.’s fee plan again

A federal appeals court on Tuesday told the Securities and Exchange Commission to review more closely a plan by Options Clearing Corp. to boost its capital reserve.

In an opinion filed by Merrick Garland, chief justice of the U.S. Court of Appeals for the District of Columbia, the SEC approved the OCC's fee plan "without itself making the findings and determinations prescribed by the Securities Exchange Act of 1934," according to court documents. "Instead, it effectively abdicated that responsibility to the corporation."

Mr. Garland said the SEC's action "does not represent the kind of reasoned decision-making required" under federal law, according to the documents.

The plaintiffs, including KCG Americas, Susquehanna International Group and Box Options Exchange, objected to the SEC's approval of OCC's plan to share fee income with the clearinghouse's exchange owners by giving them dividends, according to the documents. Previously, excess fee income had been sent to OCC members.

The appeals court has direct jurisdiction over SEC actions.

OCC, which has already implemented the change, was required to ask the SEC for approval of the fee plan because it's listed as a self-regulatory organization under the Securities Exchange Act. The court ruling does not require it to overturn the fee plan.

Craig Donohue, OCC executive chairman and CEO, said in a news release that the corporation is "disappointed in the court's decision to remand, (but) we are pleased by its ruling that the SEC's order approving the capital plan remains in effect." The release said OCC would provide the SEC any information it needed to evaluate OCC's capital plan.

An SEC spokeswoman said the agency would not comment on the ruling.