FCA’s Market Watch 82: Key actions for firms on remediation
Following on from Market Watch 81 where the FCA assessed the root causes of transaction reporting quality issues, Market Watch 82 focuses on the process firms are expected to engage with once errors are identified.
All reporting firms should have robust procedures in place to identify, address and disclose regulatory reporting issues. Many will be actively engaged in the process. The findings detailed within Market Watch 82 stem from the FCA’s recent observations supervising the UK MiFID transaction reporting regime and focus on observed inefficiencies within the processes firms have in place.
The Market Watch is in two halves – the first looks at remediation processes, and the second reviews remediation notifications.
We’ve distilled the newsletter into key actionable items that all firms must/might/should consider now if they haven’t already.
Remediation process
- Document and agree a prioritisation methodology against which all “issues” are assessed
- Remediate accordingly to the agreed prioritisation (the FCA makes it clear that under-reporting takes priority over misreporting a field where the supervisory priority has been downgraded)
- Remediate the root cause first, then back report
- Accurately identify all impacted records
- Due care and diligence ensures repetition, missed records and unnecessary deadline extension requests are avoided
- Determine and action a remediation plan to fix all impacted records within a realistic timeline
- Ringfence resources to remediation – remediation is never done well “off the side of the desk”. A focused effort by regulatory subject matter experts will likely get the job done more efficiently than relying on individuals with other priorities
- Make regulatory reporting and data migration a key sign off for all change projects be it new business, infrastructure or regulatory reporting driven change
- Regular data quality testing will confirm that issues are no longer occurring once fixed and it is equally important to make sure that new issues aren’t introduced or worse, previous ones reoccur.
Remediation notifications
- Clearly state whether the issue is misreporting, under-reporting, or late reporting. Make sure you describe it in plain language, avoid internal jargon and keep it to the point
- Align your root cause analysis with the common causes from Market Watch 81. If citing human error, you should assess whether better processes, controls, or oversight could have prevented it
- If exact impact details aren’t available, submit the notification without delay. Make this clear and provide estimated figures if needed. Indicate when the full assessment will be completed and specify whether volumes are exact or approximate
- Give details about the planned remediation – if this is work in progress then detail the activity required to determine back-reporting timelines rather than give no details. Even the best teachers can’t mark blanks
- Clearly link the issue to its specific root cause, focusing on the actual weakness in systems or controls. Avoid generic statements about overall improvements. If including a third party, assess whether better vendor controls or oversight could have prevented the problem.
As we were all reminded during the football over the weekend, a draw after two halves leads to penalties, and the FCA reminds us that “some firms must improve their operational frameworks”. A look back to the Final Notice issued by the FCA earlier this year reminds us that the firm in question was chastised for not only for accuracy errors but also for delayed regulatory notification and weaknesses in controls.
Our ReportShield services are used by hundreds of firms to address the issues raised by the FCA in Market Watch 81 and 82. For help with your remediation programme, a review of your controls or a comprehensive assessment of your data quality using our market-leading tools, please get in touch.
