SEC to Put Stock Exchanges Under the Microscope

Stock exchanges will be subject to further scrutiny by the Securities and Exchange Commission this year.
Matthew HellerJanuary 14, 2015
SEC to Put Stock Exchanges Under the Microscope

The U.S. Securities and Exchange Commission has notified stock exchanges that it will be conducting a series of compliance examinations in 2015, with outsourcing of regulatory functions, monitoring of listings, and information technology management included in its list of examination priorities.

In letters to exchange officials, the SEC also said Tuesday it would examine how some exchanges have complied with remedial measures they have agreed to implement since 2012 as a result of enforcement actions.

“We have been involved in this space and there have been enough activities and remedial promises made that we thought it was sensible to go back and follow up,” Andrew Bowden, the head of the SEC’s examination program, told reporters.

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Some of the exchanges that have been sanctioned recently include the Intercontinental Exchange, which operates the New York Stock Exchange; Nasdaq OMX; and the Chicago Board Options Exchange.

Reuters noted that the SEC has in recent years stepped up its oversight of exchanges, as part of a broader crackdown into violations of equity market structure rules. “The upcoming compliance exams suggest the SEC is not easing up its scrutiny,” Reuters said.

On Monday, the commission imposed a record $14 million penalty on exchange operator BATS Global Markets to settle charges that two exchanges formerly owned by Direct Edge Holdings gave advantages to certain high-speed trading firms. BATS acquired the EDGA and EDGX exchanges from Direct Edge in August 2013.

The letters to exchange officials were released concurrently with the SEC’s annual list of examination priorities, which, among other things, includes plans to more closely scrutinize how proxy advisory firms make voting recommendations to shareholders and disclose various conflicts of interest.

“Proxy advisory firms have come under scrutiny in recent years amid concerns they wield too much influence over corporate elections,” Reuters explained.

The SEC said it will conduct exams to ensure proxy advisory firms are complying with the guidance it issued last year on how they should disclose conflicts.

Source: Reuters

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