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Financial Services firms are presenting “incomplete and inaccurate” transaction reports to the regulator, the UK’s watchdog has said, flouting rules on tracking trades.
The Financial Conduct Authority published fresh criticism of UK firms’ Compliance with the MiFID Reporting regime, which requires banks to report Data from all recorded trades.
The update, published on November 7, pinned the issues on “weaknesses” in firms’ governance, Reporting processes, control frameworks, and “change management”.
One week later, the FCA issued a paper with a suggested overhaul of the UK’s MiFID regime, to end “inconsistent, incorrect or incomplete reporting”.
Miƚed over MiFID?
Since the UK adopted MiFID six years ago, firms have found it challenging to comply with its standards. Key obstacles include recurring manual errors and persistent Data Quality issues, which have compounded difficulties over implementation.
In the first two years after the rules took effect, 546 firms — around 15 percent of the 3,724 UK Investment Companies required to report transactions — disclosed errors in their Reporting.
A further five percent had been contacted by the FCA regarding potential errors. Some firms including Goldman Sachs were accused of flouting the rules intentionally.
This fresh warning from the regulator indicates that the sector has not solved its historic problems. The FCA warned that it plans “further work” on the issue “to ensure appropriate remedial actions are taken by firms”. Matthew Vincent, managing director at trade and transaction Reporting firm Kaizen, says the watchdog is sending out a clear message.
“The FCA’s report underscores how easily [Data] can crumble under poorly managed change. We’re seeing this Data fragility first-hand in the Bond market, which faces serious threats from widespread data inaccuracies,” says Thomas McHugh, CEO of Data Management platform Finbourne. His firm analysed more than 155mn transaction records from 2023 to 2024 and found that 11 percent of the total required “de-replication” before they could be used.
“Issues like this aren’t just technical flaws. They’re fundamentally distorting the market and undermining investor confidence,” he warns.
Many firms continue to rely on “Siloed Legacy Systems”, with “Data scattered across the business”, explains Kifaya Belkaaloul of Financial Software firm NeoXam.
“Increasing transparency and verifiability across the industry was a key goal of UK MiFID requirements, but until all organisations can depend on smooth interoperability between strong Data architectures and modern Reporting solutions, the task at hand will remain incomplete,” she says.
Ralf Rühling, head of investor protection propositions at Swiss stock exchange operator SIX, says firms’ Data quality is “burdened” by ongoing problems that have “sizeable implications”.
US regulators, which often lead the way in global enforcement, have become more aggressive in data failures as they become more familiar with their complexities. But Banks still struggle with sprawling Datasets and regulatory demands. JPMorgan Chase was fined up to $350mn for failing to feed certain trade and order Data to its internal trade surveillance platforms. The FCA also criticised firms with poor organisational structures “where reporting lines, function allocation, and responsibilities are not clearly delineated”. It said a “lack of accountability” for proper Reporting could cause Reporting problems.
In addition, the regulator called out firms that failed to monitor services and Data provided by third parties, saying the oversight prevented them from identifying issues growing in their supply chains.
Firms going through change often struggle with Data Quality issues, the FCA said, and will suffer from “significant reporting gaps”.
