Despite progress since 2018 review, many firms continue to face challenges with inaccurate and incomplete transaction reports. The issues often stem from key operational weaknesses. Market watch 81highlights five primary areas for improvement: Change Management, Reporting Process and Logic,Design, Data Governance, Control Framework and Governance, Oversight and resourcing.
These interconnected factors create a complex web where weakness in one area can exacerbate problems in others. To address these challenges, firms must proactively review and enhance their internal process and systems
Key Areas for Improvement:
1. Change Management: Poorly managed changes, such as system upgrades or personnel turnover, often lead to data quality issues. Firms should ensure robust change management processes, focusing on continuity planning and thorough business analysis before implementing changes.
2. Reporting Process & Logic Design: Misinterpretation of MiFID II rules often results from poorly designed reporting logic. Firms should align their reporting processes with regulatory requirements and their unique business needs, ensuring clear and well-documented procedures.
3. Data Governance: Data fragmentation is a significant challenge, with errors stemming from outdated or inconsistent Data sources. Firms should strengthen data governance by improving data mapping, ensuring reliable data sources, and documenting data lineage.
4. Control Framework: A robust control framework is essential for detecting errors before they become compliance risks. Firms should regularly review and update their control frameworks to ensure effective reconciliation processes and quick identification of reporting gaps.
5. Governance, Oversight, and Resourcing: Proper oversight is crucial for avoiding operational inefficiencies. Firms should embed transaction reporting within their broader risk management framework, ensure appropriate staffing and expertise, and prioritise regular management information reporting.
A Call to Action:
Firms must take immediate steps to enhance their transaction reporting processes to stay compliant with the UK MiFID regime. By addressing the identified weaknesses, financial firms can mitigate regulatory risks, improve data quality, and avoid costly penalties for non-compliance.
Delta Capita recommends:
1. Strengthening Change Management practices
2. Reviewing and improving reporting logic design
3. Investing in data governance
4. Implementing robust control frameworks
5. Prioritising governance and resourcing
By focusing on the above key areas firms will be better equipped to meet the rigorous demands of MiFID II transaction reporting, ensuring accuracy and compliance while safeguarding against regulatory risks.
For more information about how Delta Capita can help you, get in touch today.
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