Most firms are struggling with their transaction reporting obligations under MiFIR and EMIR, with research from ACA Group showing that over 6 million transaction reporting errors were identified across a sample of 30 review projects.
This equated to an average 200,000 errors per review which means that regulators are not receiving the data they need to successfully identify market abuse and systemic risk.
The Financial Conduct Authority (FCA) states that complete and accurate data is critical to transaction reporting under these regimes. Errors across multiple reports could not only lead to undetected market abuse or systemic risk – but also pose significant financial, reputational and compliance risk for firms reporting inaccurately.
These findings build upon from the financial services governance, risk, and compliance (GRC) advisor’s past research which showed that 97% of reports under MiFIR/EMIR contained inaccuracies in 2021.
The new report also said there is evidence to suggest that firms either remain naïve around their reporting obligations, have misplaced confidence the quality of their reporting, or simply don’t know that they’re in breach.
In addition, results from a recently submitted Freedom of Information request by ACA to the FCA revealed that the number of errors and omissions (E&O) forms submitted by firms to the regulator was on average just three per year.
Despite this, 87% of firms said they are confident in the quality of their reports.
“We’ve been warning firms for some time that transaction reporting needs close and ongoing monitoring,” said Matt Chapman, managing director and co-lead of ACA’s Regulatory Reporting Monitoring & Assurance (ARRMA) service.
He added, “Our continued research shows that there remains a clear disparity between perception and reality, with many firms believing that their reporting is accurate, despite the data suggesting otherwise.
The longer it takes firms to realise they have a problem, the more expensive and time consuming it becomes to fix and the more embarrassing the conversation with the regulator becomes.”
Charlotte Longman, director and co-lead of the ARRMA service, noted, “It’s vital that firms prepare for increased regulatory scrutiny in the months ahead as the FCA has hinted that it will be combatting persistent reporting failings by taking action against firms which are not taking sufficient action to remedy their errors.
“With MiFID II recently reaching its four-year anniversary, it’s becoming a question of ‘when’ and not ‘if’ we start hearing about firms being fined or censured.”
©Markets Media Europe 2022
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