Why communication and cooperation are the key to avoiding regulatory reporting fines


Recently we saw a large inter-dealer broker fined by the FCA for ‘improper trading’. The final notice stated that the firm was “failing to conduct its business with due skill, care and diligence, failing to have adequate risk management systems and for failing to be open and cooperative with the FCA”.

This led me to think that the same message can be used across all regulations and that this was the same communication we heard from the FCA when it handed out the two MiFID I fines earlier this year. Introducing care and diligence with added controls, governance and independent quality assurance testing is one thing; it’s then communication and cooperation with the regulator that are key.

Be proactive, transparent and open with your NCA

Being on the front foot with the regulator should not be deemed a negative or onerous task. It is incredibly important that all firms that have found an issue with their reporting, relay this message to their National Competent Authority (NCA) as soon as they can, through the applicable channels. The key message we see and hear from NCAs is that they always encourage firms to be proactive, transparent and open.

Once an issue has been identified either internally or externally via a quality assurance testing service, analysis has to be completed and the relevant action decided upon.

Alert your NCA as soon as possible

Depending on the regulatory regime, the NCA may require a form to be completed. In the UK, for MiFIR transaction reporting an errors and omissions form* needs to be emailed to the Markets Reporting Team.  For EMIR, a breach notification form* needs to be completed.

The likelihood is that the sooner the issues are identified and then communicated, the happier the relevant NCA will be that you are being proactive and cooperative to improve the quality of your reporting.

At Kaizen, as well as helping firms check the accuracy of their regulatory reporting, we have former regulators as part of our team of subject matter experts. Not only does their expertise feed into our testing services, our clients also benefit from our advice through the process of communication and cooperation with your NCA.

We’ve helped a number of firms provide confidence to the regulator through identification of issues in reporting quality but also through putting the right controls in place. Contact us if you’d like to discuss any of the issues raised in this blog.

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