Global investment bank fined £27.6 million for misreporting
It was announced yesterday that the Financial Conduct Authority (FCA) has fined a global investment bank a reported £27.6 million for misreporting 135.8 million transactions between 2007 and 2017 under MiFID I. It is surely no coincidence that this penalty was handed out in the first quarter of the year that UK firms are starting to receive letters from the FCA’s Markets Reporting Team. The global bank admitted to reporting over 86 million transactions containing inaccuracies and incomplete data. Further, the bank also misreported 49 million transactions.
Mark Stewart, FCA Director of Enforcement and Oversight is quoted as saying: ‘Firms must have proper systems and controls to identify what transactions they have carried out, on what markets, at what price, in what quantity and with whom. If firms cannot report their transactions accurately, fundamental risks arise, including the risk that market abuse may be hidden.’
Under MiFID I a total of 13 financial services firms have now been fined.
MiFID II – a different beast
While we don’t yet know what the penalties under MiFID II will be, it feels like a different beast to the previous regime. In comparison, MiFID I now seems almost light touch and the breadth of the regulation and the accuracy required by the standards are way beyond what we have previously seen. We would therefore not be surprised to see an increase in the penalties and the FCA getting tougher in enforcement. The FCA have started to ramp up their effort to clamp down on MiFID II regulated firms. It is expected that the regulator will target buy and sell side firms alike in the latter half of 2019 with Transaction Reporting being the prime candidate for inspections.
Many firms AutoRek have been speaking to are now starting to pay attention to RTS 6 and RTS 22 Article 15, which call for pre and post reporting reconciliations. This is not surprising as the Transaction Reporting regime has faced a number of both internal and external challenges since MiFID II went live in 2018. Now that the business as usual operational aspects are in place, it is time to focus on the reconciliatory requirements of the regulation. A strong, automated control framework not only significantly reduces the risk of misreporting and/or under/overreporting in the first place but also demonstrates to the regulator that the right processes have been put in place to capture errors. Using technology such as AutoRek, ensures that these issues are escalated to the appropriate parties and remediated within the stipulated timeframe.