Regulatory Reporting: Flying to the Moon and Back

Bernardo Castel-Branco

Rumour has it that during the 1960 US election, NASA’s highly stressed team of experts heaved a collective sigh of relief when the project plan demonstrated that they could meet Kennedy’s promise and put a man on the moon. With horror, they then realised the final goal was to get the astronauts safely back to Earth!

88% of transaction reports contain one or more errors
Kaizen Reporting, 2020

What does any of this have to do with regulatory reporting for the investment industry? Over 2.5 years have passed since MiFID II ‘go-live’, and with 88% of transaction reports containing one or more errors (Kaizen Reporting, 2020), Asset & Wealth Managers large and small are spending significant sums on remediation. The sector is on its way to ‘landing on the moon’: meeting error fixing and back reporting obligations.

However, this is only half the job and firms should be wary of seeing this as a complete success. Asset & Wealth Managers will also have to get their astronauts safely back to Earth: an effective ‘business as usual’ environment delivering timely and accurate reporting month in, month out, both now and in the future. Not just for MiFIR obligations but for all regulatory reporting requirements (e.g. EMIR, SFTR and Shareholder Notifications to name just a few).

Where are we now?

The Regulator’s stance has toughened over the last 12 months; Asset and Wealth Managers are having to demonstrate controls that allow them to monitor the accuracy, completeness and timeliness of regulatory reports. Where errors are found, the FCA is expecting firms to work at sufficient pace and with effort to resolve them in appropriate timescales to avoid regulatory scrutiny, or worse. In its regular Market Watches (62-64), the FCA is reinforcing its stance that accuracy and completeness for transaction reporting remain a top priority and there will be no leniency for inaccurate reports after the Brexit transition period.

Additionally, with the widening of the net under Senior Manager and Certification Regime (SMCR) to include Asset & Wealth Managers, the Board and C-suite now need to ensure that the business they are responsible for has suitable controls and complies with regulatory standards.

Often, when regulatory breaches are identified, ad-hoc projects are mobilised to rectify them and complete the onerous task of back-reporting. These projects often have narrow objectives and look to resolve specific issues, failing to fix root causes with appropriate, lasting solutions. If these problems are not tackled head-on, firms risk facing a whole host of new regulatory breaches.

Getting back from the moon

As firms begin to get a handle on their remediation obligations, leading players are considering their overarching operating model – for all regulatory reporting regimes – and are determining whether it is still fit-for-purpose. Firms need to ask themselves: what are the key considerations for the regulatory reporting operating model of the future?

  • Scope is critical. Firms must first identify all of their in-scope regulatory reporting regimes and ensure they are mapped to an accountable Senior Manager to provide appropriate oversight. The resourcing model and team shape is the next consideration; we are now seeing more and more firms building a Centre of Excellence to complete regulatory reporting across all in-scope regimes across EMEA or globally, as required. This generates many benefits including sharing of resource and technical expertise and, perhaps most importantly, a clear reduction in regulatory risk across all regimes.
  • Employees within the Centre of Excellence need to have the right skillsets consisting of a collective blend of deep technical knowledge to allow them to easily analyse the huge volumes of reporting data and query Order Management and Reporting Systems. A skilled Compliance team must be on-hand to support the team and be confident in its ability to sign-off regulatory interpretation.
  • Effective change management is key to ensuring that all relevant developments are fed into the Centre of Excellence allowing the business to make the appropriate enhancements. The best operating models will be underpinned by the latest workflow tools, accuracy testing and strong data governance
  • Last but not least, embedding a culture of ownership and continuous improvement within the right governance framework is the only way for the Senior Managers at risk, typically the COO or CEO, to know for sure whether regulatory reporting is effective. The price of failure is high and every role matters.

Why should firms act now?

Just like planning the safe return to Earth for Kennedy’s astronauts, the risks caused by any delay to the next part of the journey (developing a best-in-class regulatory reporting operating model) should be beyond the appetite of Senior Management at the vast majority of firms.

Leading Asset & Wealth Managers are looking above and beyond fixing errors, and instead are committing to embedding a truly effective BAU environment for all of their in-scope regulatory reporting regimes. Regulatory risk can be reduced to acceptable levels and efficiency and controls can be enhanced to match desired business standards. Only then will we see something like journey’s end: successfully getting the astronauts back home.


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If you would like to find out more about the topics raised in this article or would like to discuss the Regulatory Reporting challenges faced by your organisation, please get in touch

About the Author

Bernardo Castel-Branco
Associate Director

Bernardo is an Associate Director at Alpha FMC with more than 10 years of regulatory consulting experience for the Asset and Wealth Management Industry. He leads Alpha’s Regulatory Reporting proposition and has supported some of the largest regulatory reporting implementation and remediation projects for the buy side.