Widespread Errors Present in UK MiFIR Transaction Reporting, According to Analysis From Duff & Phelps

Figures released by the Financial Conduct Authority (FCA) show 383 entities notified the Regulator of problems with their MiFIR reporting in 2018, accounting for 10% of the 3,784 UK investment firms that are required to be MiFID II/MiFIR compliant, according to new analysis from Duff & Phelps, the global advisor that protects, restores and maximizes value for clients. The data provides further clarity on compliance reporting shortfalls amongst UK investment firms and follows previous reports that more than 13002 MiFID II breaches were reported to the FCA in 2018.

During the same year, more than 6.9 billion1 transaction reports were submitted to the FCA’s Market Data Processor, illustrating the vast data resource the Regulator now has at its disposal.

Nick Bayley, Managing Director, Compliance and Regulatory Consulting at Duff & Phelps said, “Despite the large percentage of UK investment firms which have notified the Regulator of issues with their reporting, there are likely many more firms, particularly on the buy-side, that are unaware that they are reporting incorrectly. I suspect the true number of firms with reporting errors is much higher. The data also shows that many firms notified the FCA on more than one occasion, suggesting that there could be systemic issues with some firms’ reporting processes.

“Incomplete or inaccurate transaction reporting by firms means the Regulator is more likely to miss instances of potential market abuse, and the FCA has publicly stressed this fact. As the regulator said when announcing the recent UBS fine ‘If firms cannot report their transactions accurately, fundamental risks arise, including the risk that market abuse may be hidden3.’

“The FCA is now processing a breathtaking amount of data on UK firms’ activity, with more than 6.91 billion UK MiFID transactions received in 2018 alone. With this extensive data pool, the Regulator will be able to perform more advanced data analytics, which goes wider than just using its SMARTS market surveillance technology. It shouldn’t be any surprise that the FCA is trying to recruit data scientists to grow its capabilities in this area.

“After the rush to implement MiFID II at the start of 2018, the FCA was in ‘education mode’ concerning transaction reporting and the focus was on teaching firms how to interpret the rules. What we see now is that the FCA is in ‘encouragement mode’, telling firms how they can avoid common errors. It surely cannot be too much longer before the FCA starts to transition into ‘enforcement mode’, particularly for those firms failing to make a genuine effort to meet their regulatory requirements.”

Notes to Editors
Duff & Phelps’ analysis was conducted using information received from the Financial Conduct Authority in May of 2019 after a request under the Freedom of Information Act.

About Duff & Phelps
Duff & Phelps is the global advisor that protects, restores and maximizes value for clients in the areas of valuation, corporate finance, investigations, disputes, cyber security, compliance and regulatory matters, and other governance-related issues. We work with clients across diverse sectors, mitigating risk to assets, operations and people. With Kroll, a division of Duff & Phelps since 2018, our firm has nearly 3,500 professionals in 28 countries around the world. For more information, visit www.duffandphelps.com

For Further Information
Gaby Bryson, Rostrum
[email protected]
+44 (0)203 727 3757

Sources
16,903,129,959 transaction reports were submitted to the FCA’s Market Data Processor in 2018
21,335 transaction reporting error and omission notifications were received by the FCA in 2018
3https://www.fca.org.uk/news/press-releases/fca-fines-ubs-ag-276-million-transaction-reporting-failures

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