MiFID II Regulatory Reporting Incomplete
Cappitech, a leading provider of regulatory reporting and intelligence solutions for the financial services industry, has completed its second annual MiFID II & Best Execution survey which shows that firms are still struggling with reporting quality and processes. It also highlights the growing understanding of the value of external reviews as a solution and the desire to have solutions that can analyse reporting data for business insights.
Overall, the report, authored by Mark Kelly, a member of the Cappitech Advisory Board, suggests that reporting regimes’ requirements have not yet been fully grasped and warns that while none of the 31.6% of respondents who have received feedback from the regulators as to their quality of their submissions (in addition to automated rejections) have been fined, this currently more relaxed approach is unlikely to continue indefinitely.
Mark Kelly comments: “The survey results point to firms still not being fully comfortable with MiFID II reporting requirements. At the beginning of 2019, firms had told us that this year would be one of setting KPIs and reviewing data quality, but this process is clearly happening more slowly than anticipated. The use of external analysis and tools to spot problems may alleviate some of these challenges on the basis of ‘don’t mark your own homework’ which will be important as the regulators will start to impose sanctions on firms who are not managing their data appropriately.”
Ronen Kertis, CEO and Founder of Cappitech, comments: “Firms are not fully complying with monitoring best execution requirements. They also face far-reaching challenges such as reconciliation – which was particularly highlighted together with not having the internal expertise to keep up with the fast changing regulations. We believe that third party providers are a good way to overcome these challenges by providing domain expertise gained through dealing with many similar clients. Using the right vendor also helps address the other clear preference raised by 64% of respondents saying it is important to streamline their reporting obligations by using a single solution or vendor.”
Additional highlights of the survey include:
- 68% plan to use existing reporting solutions for future regulatory requirements with 64% thinking it’s important or very important to have one solution across all reporting regimes.
- Only 55% are monitoring their reporting daily but often fail to heed the call for periodic reconciliations.
- Reconciliation is the largest issue with reporting MiFID, with 44% of respondents identifying reconciliation as their main pain point.
- 61.4% are not monitoring best execution despite this being a requirement.
- Feedback from regulators has been limited with 68.4% of respondents answering that they have not received comments on MiFID II compliance from NCAs.
The full report can be downloaded here.
The survey was completed by 83 respondents across brokerages, banks, asset managers and other financial and non-financial institutions in October and November of 2019. 75% are in Europe, including the UK.
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