A third of firms getting transaction reporting wrong

With a third getting transaction reporting wrong

NEWS RELEASE: Over three years since MiFID II regulations were introduced, many firms are still not fulfilling basic reporting requirements. FCA figures show over 1000 error and omissions forms have been submitted every year since the introduction of MiFID II, whilst a recent poll from financial regulation consultancy Bovill suggests a third of firms believe their reporting processes and systems are not fit for purpose. Bovill says firms should act now before the regulator cracks down.

During a recent webinar on transaction reporting, Bovill found that 29% of firms surveyed are not currently running accuracy checks on their transaction reporting and only 50% are running a full reconciliation, despite both being explicit MiFID II requirements. In addition, over a third (34%) of firms surveyed say they are not confident that their current transaction reporting processes and systems are fit for purpose.

These findings from Bovill’s survey are bolstered by a recent FOI response from the FCA suggesting the problem is systemic and widespread. The response shows roughly a third of executing entities sending transaction reports to the FCA have submitted an error and omission notification each year for the past three years – over 1,000 firms a year.

Damon Batten, Capital Markets Practice Lead at Bovill, comments:

“Three years into the MiFID II regime, transaction reporting is clearly still an issue for investment firms and trading venues. Our poll results suggest that a significant number of firms are not compliant with transaction reporting requirements. If you haven’t yet tackled this problem, now is the time to do so. You don’t want to be in the last 20% or the last 10% to get this right, because the regulator will come knocking.

“In the past, the FCA has handed out fines under MiFID I, but they are yet to issue any major fines for MiFID II noncompliance. Our advice to firms is to ensure they don’t get caught up in the first round of fines – they are inevitable, they just haven’t happened yet.”

One of the main challenges for investment firms and trading venues is attaining and then maintaining an acceptable steady state reporting stance, as the business and technological environment continue to change and develop. Running transaction checks is a complex task, which requires design and implementation of a management system. Historically, vendors of this technology have been expensive and so smaller firms with fewer resources have been at a disadvantage.

Damon Batten, Capital Markets Practice Lead at Bovill, continues:

“Firms are increasingly building more sophisticated frameworks for ensuring accuracy of reports, and conducting regular reconciliations. However, there is a large variance in the level of maturity of this process, with a material number of firms still not even accessing their MDP data.

“The regulator could help by offering more guidance on what is acceptable for smaller firms and what appropriate controls should look like. Currently the guidance is the same for all sizes of transaction, and some small firms might see it as overkill for the mainly low risk activity they carry out.“

ENDS

Notes for editors

FOI Response from FCA: The number of “Errors & omissions notification forms” received by the FCA, broken down by year 2018, 2019, and YTD 2020.

Year 2018 2019 2020 YTD
Errors and Omissions Notifications Received 1,335 1,269 1,250

Bovill’s survey results are from a poll of 99 firms during a webinar held by Bovill and RegTech partner Qomply on 20th January 2021

Bovill and Qomply, a leading transaction reporting RegTech firm, have recently partnered to provide a complete end-to-end transaction reporting service for financial institutions. Powered by Qomply’s technology, Bovill can streamline their HealthCheck services to provide clients with immediate feedback on the accuracy and completeness of their transaction reports. When requested, Bovill can complement these findings with an end-to-end review and guidance through the remediation process.

For further information, please contact:

Polly Barton – Bovill

+44 (0)20 7620 8440

pbarton@bovill.com

Tabitha Adams – Luther Pendragon

+44 (0)7500 013062

bovill@luther.co.uk

About Bovill

Bovill is a specialist financial services regulatory consultancy, established in 1999 and headquartered in the UK with offices in London, Chicago, Singapore and Hong Kong. Our sole activity is the provision of high-quality, technically-focused advice and consultancy services on all aspects of financial services regulation. We aim to develop effective solutions to the complex problems of our clients, and do not offer commoditised advice or services. Bovill has experts spanning all aspects of financial regulation in the UK, EU, Asia and the Americas.

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