New research from ACA Group reveals that most firms are struggling with their transaction reporting obligations under the EU’s MiFIR and EMIR requirements. With findings revealing more than 6 million transaction reporting errors across a sample of 30 review projects, averaging 200,000 errors per review, regulators are not receiving the data they need to successfully identify market abuse and systemic risk.
The new findings build upon previous research from ACA Group, a governance, risk and compliance (GRC) adviser in financial services, which found that 97 percent of reports under MiFIR/EMIR contained inaccuracies in 2021.
There’s also 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. An ACA Group-submitted Freedom of Information (FOI) request revealed that the number of errors and omissions forms submitted by firms, documents in which firms admit reporting mistakes to the regulator, was on average just three per year. Meanwhile, a worrying 87 percent of firms say 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,” Matt Chapman, managing director and co-lead of ACA Group’s Regulatory Reporting Monitoring & Assurance Service (ARRMA), said in a news release. “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 realize 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 ARRMA indicated that firms should be prepared for a crackdown from government agencies.
“It’s vital that firms prepare for increased regulatory scrutiny in the months ahead, as the (Financial Conduct Authority) 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,” Longman said in the release. “With MiFID II reaching its four-year anniversary, it’s becoming a question of ‘when’ and not ‘if’ we start hearing about firms being fined or censured.”
