Transaction reporting still not a priority for firms despite recent ESMA fine, finds ACA Group
03 May 2022 UK
Image: Andrii Yalanskyi
Compliance advisor, ACA Group has found that transaction reporting is still not a priority for firms, despite the European Securities and Markets Authority’s (ESMA’s) fine handed out to REGIS-TR last year.
ACA Group’s findings outlined that though concerns around inaccurate regulatory reporting are leading to fears of undetected market abuse and an inability to monitor for systemic risks, firms are still continuing to deprioritise improving their reporting obligations.
The findings come 10 months after REGIS-TR, the EU’s second-largest trade repository (TR) was fined €186,000 for eight breaches of EMIR for failing to provide “direct and immediate access” to details for derivative contracts, as required by the regulation.
Despite the considerable fine for REGIS-TR, ACA Group found that only 19 per cent of firms identified trade and transaction reporting as a “top compliance” challenge for firms in 2022.
In addition, the same survey found 65 percent of those asked were confident in the quality of their own reports, though the results for this same question stood at 87 per cent in 2021.
The findings, derived from a survey conducted at ACA’s Regulatory Horizon virtual conference last month, come off the back of a 2021 analysis by the firm which showed 97 per cent of reports under Markets in Financial Instruments Regulation (MiFIR)/EMIR contain inaccuracies.
The report warned that errors could lead to undetected market abuse and a lack of transparency into systemic risk, while also posing significant financial, reputational and compliance risks for reporting firms.
It also warned that a regulatory crackdown from the Financial Conduct Authority and ESMA was likely imminent, with ESMA’s penalty to REGIS-TR indicating a continued focus on data quality.
Matt Chapman, managing director and co-lead of the ACA’s regulatory reporting monitoring and assurance (ARRMA) service at ACA Group, comments: “It is good to see a downturn in the overconfidence that so concerned us in last year’s report. But there remains a dangerous lack of understanding or prioritisation around the current processes required to meet MiFIR/EMIR standards.
He adds: “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 ACA’s ARRMA Service at ACA Group, says:
“It is no surprise that regulators are not happy — they are not receiving the data they need to successfully identify market abuse and monitor for systemic risk in the derivatives market.
She adds: “If firms want to avoid fines for non-compliance, they need to urgently review and rework their data and compliance processes, including their exception management programme, and implement close, ongoing transaction monitoring. It sounds overwhelming but there are tools out there to help.”
ACA Group’s findings outlined that though concerns around inaccurate regulatory reporting are leading to fears of undetected market abuse and an inability to monitor for systemic risks, firms are still continuing to deprioritise improving their reporting obligations.
The findings come 10 months after REGIS-TR, the EU’s second-largest trade repository (TR) was fined €186,000 for eight breaches of EMIR for failing to provide “direct and immediate access” to details for derivative contracts, as required by the regulation.
Despite the considerable fine for REGIS-TR, ACA Group found that only 19 per cent of firms identified trade and transaction reporting as a “top compliance” challenge for firms in 2022.
In addition, the same survey found 65 percent of those asked were confident in the quality of their own reports, though the results for this same question stood at 87 per cent in 2021.
The findings, derived from a survey conducted at ACA’s Regulatory Horizon virtual conference last month, come off the back of a 2021 analysis by the firm which showed 97 per cent of reports under Markets in Financial Instruments Regulation (MiFIR)/EMIR contain inaccuracies.
The report warned that errors could lead to undetected market abuse and a lack of transparency into systemic risk, while also posing significant financial, reputational and compliance risks for reporting firms.
It also warned that a regulatory crackdown from the Financial Conduct Authority and ESMA was likely imminent, with ESMA’s penalty to REGIS-TR indicating a continued focus on data quality.
Matt Chapman, managing director and co-lead of the ACA’s regulatory reporting monitoring and assurance (ARRMA) service at ACA Group, comments: “It is good to see a downturn in the overconfidence that so concerned us in last year’s report. But there remains a dangerous lack of understanding or prioritisation around the current processes required to meet MiFIR/EMIR standards.
He adds: “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 ACA’s ARRMA Service at ACA Group, says:
“It is no surprise that regulators are not happy — they are not receiving the data they need to successfully identify market abuse and monitor for systemic risk in the derivatives market.
She adds: “If firms want to avoid fines for non-compliance, they need to urgently review and rework their data and compliance processes, including their exception management programme, and implement close, ongoing transaction monitoring. It sounds overwhelming but there are tools out there to help.”
Next regulation article →
European Commission launches consultation to improve WHT refund procedures for cross-border investors
European Commission launches consultation to improve WHT refund procedures for cross-border investors
NO FEE, NO RISK
100% ON RETURNS If you invest in only one asset servicing news source this year, make sure it is your free subscription to Asset Servicing Times
100% ON RETURNS If you invest in only one asset servicing news source this year, make sure it is your free subscription to Asset Servicing Times
