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Financial Institutions Delusional on Quality of Regulatory Reports, ACA Study Finds

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Despite finding that 87% of firms are confident in the quality of their MiFIR and/or EMIR reports, research commissioned by ACA Group has discovered that 97% of reports submitted to regulators via Approved Reporting Mechanisms (ARMs) and Trade Repositories contain inaccuracies. The research found reporting data quality to be poor, with each report containing an average of 30 separate error types.

The issues around regulatory reporting were discussed extensively last week on two panels at A-Team Group’s RegTech Summit Virtual, recordings of which are still available to watch here.

The first panel – ‘Re-imagining the regulatory reporting framework to reduce the cost of compliance’ – explored how global regulators like ESMA, ASIC and CFTC are seeking to align regulatory reporting requirements, with a view to unlocking potential efficiencies and easing complexity. Panellists included a mix of practitioners, industry service providers and technology suppliers, including: Robin Doyle, MD, Regulatory Affairs, JP Morgan; Chad Giussani, Head of Transaction Reporting, Compliance, Standard Chartered; Malavika Solanki, Member of the Management Team, Derivatives Service Bureau; Tom Wieczorek, MD Global Product Management UnaVista, an LSEG business; and Matt Smith, CEO, SteelEye.

The second panel – ‘European regulatory reporting post Brexit – managing MiFIR, EMIR & SFTR’ – exploring best practices and lessons learned for complying with MiFIR, EMIR & SFTR reporting regimes in the post-Brexit environment. The panel looked at how firms are dealing with managing UK and EU dual reporting requirements, and offered insights into leveraging RegTech and building best practice into regulatory reporting processes and platforms. The panel comprised Melanie Bristow, Director – SFTR & EMIR Refit Programme, UBS;  Philip Flood, Business Development Director, Regulatory & STP Services, Gresham Technologies; Nicklas Nilsson, Regulatory Specialist, Compliance Solutions Strategies (CSS); and Matthew Chapman, Managing Director and Co-Lead of ACA’s Regulatory Reporting & Assurance (ARRMA) service, ACA Group.

The ACA report said that with almost 90% of firms confident in the quality of their reporting data, many assumed their reports were fine since they had received no direct contact from the FCA. But with reports containing over 30 error types, the report said, “this is not just a case of a single mistake affecting all reports – it is a potential indication of widespread misunderstanding of how certain reporting requirements apply to firms and their activities, particularly when arrangements and activities change.”

Transaction reporting plays a fundamental role in market abuse surveillance and regulatory attention on data quality and timeliness is expected to increase in 2021 and beyond. The data shows that, even 12 months on from the EMIR REFIT, data quality is still poor as firms struggle to implement best practise, fully identify how reporting fields need to be populated differently to reflect different trading scenarios, identify and correct errors and collaborate effectively with third parties delivering their reporting.

According to ACA’s Chapman, “There is clearly a gap between perception and reality when it comes to transaction reporting. Nearly 87% of respondents in our recent survey said they were confident their transaction reporting is 100% accurate and timely. Yet, our analysis shows that it is highly likely the reports in question would have contained errors.

Chapman reckons the issue is likely to come to a head soon: “Getting trade and transaction reporting right is going to continue to grow in importance over the next 24 months. Regulators have repeatedly described complete and accurate reporting as a common good as well as their growing frustrations that firms aren’t getting it right. As a result, they are making no bones about the fact that they expect prompt and significant improvement. Although lack of public enforcement action in relation to MiFIR and EMIR reporting may have lulled some firms into a false sense of security, they must be prepared for this to change in the months ahead, or face the consequences.”

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