Too many firms still missing the mark on Mifid II and EMIR, financial advisor warns

Critical mismatch between reporting flaws and firms’ compliance confidence

by | June 18, 2021 | bobsguide

A striking majority of financial firms assessed by financial advisor ACA Group are filing inaccurate data reports, falling short of requirements from both the EU’s Markets in Financial Instruments Directive (Mifid) and the European Market Infrastructure Regulation (EMIR).

Thirty out of 31 financial services firms have posted up to 30 separate error types in their recent data filings, the consultancy warned.

However, a wider poll from the group showed that 87 percent of companies are confident they produced sound reports.

The disconnect between the two figures suggests many inaccuracies are going unnoticed, risking consequences from regulators further down the line, warned ACA’s managing director Matt Chapman.

“There is clearly a gap between perception and reality when it comes to transaction reporting.

“Although lack of public enforcement action in relation to MiFIR and EMIR reporting may have lulled some firms into a false sense of security, they must be prepared for this to change in the months ahead, or face the consequences,” he warned.

The persistence of widespread misunderstanding around the current Mifid and EMIR reporting requirements revealed by the study jars with the fact that error-free reporting is only going to become increasingly important, Chapam said.

“Getting trade and transaction reporting right is going to continue to grow in importance over the next 24 months,” Chapman warned. But regulators have repeatedly voiced “their growing frustrations that firms aren’t getting it right.”

“As a result, they are making no bones about the fact that they expect prompt and significant improvement.”

Mifid II requirements are currently under two separate reviews. A shorter-term set of amendments – partly easing rules on information reporting, product governance and position limits – were approved by the EU in February as part of the wider response to the coronavirus pandemic, aiming to temporarily help financial firms free up resources for investment.

On a longer-term horizon, over the last two years the European Securities and Markets Authority (ESMA) has carried out consultations and advising the European Commission (EC) on amendments to a broader range of requirements, upon which the EC is expected to publish final guidance by the end of the year. The resulting Mifid Review is then expected to entry into force in the course of 2023.

Separately, EMIR Refit came into force in June 2020, affecting the derivatives market. The aim was to simplify EMIR and address compliance costs, transparency issues and insufficient access to clearing for certain counterparties.

 

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