SEC Votes to Strengthen Systems Compliance and Integrity

Regulation Systems Compliance and Integrity requires entities to have a plan for when systems fail.

mary-jo-white
Mary Jo White, SEC chair

The Securities and Exchange Commission (SEC) adopted a new set of rules that were created to strengthen the technology infrastructure of the US securities markets by handing down requirements on industry members' reactions to system failures.

The new rules, called the Regulation Systems Compliance and Integrity (Regulation SCI), require certain market participants to have comprehensive policies and procedures in place for their systems.

Self-regulatory organizations (SROs), some alternative trading systems (ATSs), plan processors and certain clearing agencies all fall under Regulation SCI.

The rules also include an outline for entities on how to react when systems issues occur; inform the SEC, members and participants about said issues; perform business continuity testing and annual reviews of automated systems.

Regulation SCI will become effective 60 days after publication in the Federal Register, whereupon entities have nine months to comply. When a new ATS initially meets the volume threshold in the rules it will have six months to comply from that date. Market participants will have 21 months from the effective date to comply with industry- or section-wide coordinated testing requirements.

"The rules adopted today mark a historic shift in the Commission's regulation of the US securities markets that will better protect investors by requiring comprehensive new controls for the technological systems that form the core of our current markets," said SEC chair Mary Jo White in a statement. "The rules provide greater accountability for those responsible for our critical market systems, helping ensure that such systems operate effectively and that any issues are promptly corrected and communicated to market participants and the Commission."

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