Transaction reporting errors expose huge gaps for market abuse and systemic risk monitoring
- ACA Group research has detected more than 6 million transaction reporting errors across a sample of 30 review projects, averaging 200,000 errors per review
- 97% of reports under MiFIR/EMIR contain inaccuracies
- Despite this, 87% of firms are confident in the quality of their reports
- FCA may have crackdown in its sights
New research from ACA Group reveals that most firms are struggling with their transaction reporting obligations under MiFIR / EMIR. With findings revealing more than 6 million transaction reporting errors identified 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 FCA repeatedly 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 previous research from ACA Group, the leading governance, risk, and compliance (GRC) advisor in financial services, that found that 97% of reports under MiFIR/EMIR contained inaccuracies in 2021.
There’s also evidence to suggest that firms either remain naive around their reporting obligations, have misplaced confidence the quality of their reporting, or simply don’t know that they’re in breach. Results from a Freedom of Information (FOI) request from the FCA, recently submitted by ACA Group, revealed that the number of errors and omissions (E&O) forms submitted by firms – whereby firms admit reporting mistakes to the regulator – was on average just three per year. Meanwhile, a worrying 87% of firms say they are confident in the quality of their reports.
Matt Chapman, Managing Director and Co-Lead of the ACA’s Regulatory Reporting Monitoring & Assurance (ARRMA) Service, ACA Group, comments: “We’ve been warning firms for some time that transaction reporting needs close and ongoing monitoring. 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 ACA’s Regulatory Reporting Monitoring & Assurance (ARRMA) Service, ACA Group, added: “Over the past year, we’ve noticed a significant reduction in errors with our clients who have incorporated both technology and specialist consulting oversight. This blend has seen firms increase their accuracy, on average, by 95% once the consulting recommendations have been implemented.”
“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.”
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Notes to editor:
- Findings are based on a consolidated date review from the first thirty reviews conducted over ACA’s award-winning Regulatory Reporting Monitoring & Assurance solution during 2021.
- This release follows on from a previous media alert flagging that 97% of firms are reporting incorrectly under MiFIR/ EMIR.
