FCA "Hints" at Enforcement for Key Areas - Part 1

15 April 2020

Since MiFiD 2 came into effect in January 2018, many financial service firms have had to enhance their transaction Reporting capabilities. The inclusion of derivative and debt instruments as well as a vastly changed reference data regime.

Up until now the FCA has been offering a certain amount of leniency in its enforcement of the new regulations, but it is now signalling that it is now going to look at Transaction Reporting more closely and as consequence the threat of large fines looms. Fines for MiFiD1 mis -reporting at UBS an Goldman Sachs have run into many millions of pounds. There is no reason to believe that MiFD2 won’t attract similar treatment.

In the FCA market watch reports there are a few clues as to what areas are causing firms problems. In these two articles I will examine these areas more closely.


Price and Price Multiplier

Whilst the concept of 'price' seems intuitive, there are complications. The FCA have found that prices and price currency for monetary valued prices sometimes don’t tie together. Also, it is important to report prices in major currency units. That is to say, report in dollars not cents or pounds not pence. Sometimes market data providers can miss this in their static data or sometimes they use an alternative currency code (e.g. GBp) to denote a penny priced instrument.

For derivative contracts the price multiplier is the number of units of the underlying is represented by that contract. the quantity field (number 30) is the number of these contacts bought or sold. Setting the quantity to the total number of underlying units bought / sold in the transaction will result in a huge over stating of the transaction size. This is sure to trigger alarm bells!


National Identifiers

For fields where a national identifier may be required, ESMA has a list of valid national identifiers and the priority of each of them if there are multiple possibilities. For example, in the ESMA annex listing the different country codes:

For in Lithuanian citizen The preferred means of identification is their Personal Code (Asmen kodas) If this is not available for some reason, the persons passport number can be used (ESMA states that the personal number could be on the Lithuanian passport, so looking at a copy of a passport could well give you the first priority identifier)

Failing this, a concat code constructed from the persons given name, family name and date of birth can be used.

The FCA have mentioned that they are seeing lower priority identifiers used when higher priority identifiers are available. Reading between the lines, this would suggest that there is an over reliance or concats as these are easier to obtain from readily available information.

Transaction Report Issues

The next post will cover more common Transaction Reporting issues and the ways they can be dealt with in order to meet the regulations.

Qomply Can Help

The Qomply suite of tools can be used to check transaction reports national identifiers prior to submission to reduce errors and rejections. Contact us now to see how Qomply’s tools can help you.

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