UK firms struggling to meet Mifid II reporting requirements
A fifth of UK investment firms have made errors in transaction reporting under the second Markets in Financial Instruments Directive (MiFID II), which went live in January 2018.
According to a freedom of information (FOI) request sent by consultancy firm Duff & Phelps, 546 of the 3,724 UK investment companies admitted to errors in their reporting. Firms were either notified by the Financial Conduct Authority (FCA), or had omissions/ faults in their reports.
The FCA has held meetings with 74 firms for the purpose of discussing the quality of their transaction reporting, according to the FOI request.
According to the report, 682 firms (18%) have requested a data extract from the regulator’s Market Data Processor (MDP) system against which to check the accuracy of their reporting.
Despite this, the watchdog has yet to open any new enforcement investigations. It has previously handed out fines to both UBS and Goldman Sachs for MiFID II failings, charging the banks £27.6m and £34m respectively.
“In light of the number and size of public actions the FCA took under MiFID I and the relatively low hurdle that the FCA now applies when referring cases for enforcement, we could see several referrals of transaction reporting cases in 2020,” says Nick Bayley, managing director in Duff & Phelps’ compliance and regulatory consulting practice.
“We believe the proportion of firms that are getting their transaction reporting wrong is actually far higher than the 20% or so that have been in contact with the FCA.
“MiFID II is the broadest and most complex piece of regulation to affect the European capital markets. It is understandable that the regulator has taken quite a pragmatic approach to firms’ compliance and has allowed them the opportunity to remediate errors and improve their reporting.”
MiFID II is a piece of EU legislation that regulates firms who provide services to clients linked to financial instruments like shares, bonds, collective investment schemes and derivatives. MiFID originally came into force in November 2007, and was revised by MiFID II, which took effect in January 2018.