New research from ACA Group has revealed that 97 per cent of reports under Markets in Financial Instruments Regulation (MiFIR) and European Market Infrastructure Regulation (EMIR) contained inaccuracies in 2021.
ACA Group’s research detected more than six million transaction reporting errors across a sample of 30 review projects, which averages 200,000 errors per review — indicating regulators are not receiving the data they need to successfully identify market abuse and systemic risk.
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, says ACA Group.
There is also evidence to suggest that firms either remain naive around their reporting obligations, have misplaced confidence in the quality of their reporting, or simply do not know that they are in breach, it adds.
Results from a Freedom of Information request from the Financial Conduct Authority (FCA), recently submitted by ACA Group, revealed that the number of errors and omissions forms submitted by firms – whereby firms admit reporting mistakes to the regulator – was on average just three per year.
Meanwhile, a “worrying” 87 per cent of firms say they are confident in the quality of their reports, ACA Group highlights.
Matt Chapman, managing director and co-lead of the ACA Group’s regulatory reporting monitoring and assurance (ARRMA) service at 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 Group’s ARRMA service, ACA Group, says: “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.”
She adds: “With the second Markets in Financial Instruments Directive recently reaching its four-year anniversary, it is becoming a question of ‘when’ and not ‘if’ we start hearing about firms being fined or censured.”
