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Another MiFID Transaction Reporting Breach and an even bigger fine!

1st April 2019

UBS fined £27.6 Million for Non-compliant Transaction Reporting

Last week we informed that UBS AG had been fined £27.6 million for transaction reporting failings - the biggest fine to date by the FCA for this type of failure. However, UBS’s crown didn’t last long, with the FCA since fining Goldman Sachs International a whopping £34.3 million for the same!

Over the period from November 2007 to March 2017, Goldman Sachs International (Goldman’s) failed to provide accurate and timely reporting relating to 220.2 million transaction reports and as a result has been fined £34,344,700 by the regulator. Had they not agreed to settle, then the fine would have been £49,063,900.

And, much like UBS, it seems that new incoming regulation caught them out. November 2007 was when MiFID was first introduced, with new transaction reporting requirements implemented from the 5th November 2007. MiFID brought with is widespread regulatory change and much preparation was required for firms to become MiFID-ready.

In this instance, it seems that Goldman’s did not properly review the new regulatory reporting requirements against their existing processes and procedures and as a result, the necessary changes to ensure their reporting was MiFID compliant were overlooked. But, not only that, remained overlooked and unchanged for over nine years!

Transaction Reporting Failings:

In the FCA’s report, Goldman’s failed to provide complete, accurate and timely information in relation to 213.6 million reportable transactions. Furthermore, they also reported another 6.6 million transactions that were not required to be reported. Thus, over a period of over 9 years, Goldman’s made 220.2 million transaction reporting errors!

Therefore the FCA concluded that in relation to their transaction reporting, Goldman’s failed to take reasonable care to organise and control its affairs responsibly and effectively, in particular it showed there to be failings to aspects of:

• Its change management processes;
• Its maintenance of counterparty reporting reference data; and
• Its testing processes and procedures to ensure reported data was accurate and complete

 Purpose & Importance of Transaction Reporting

To ensure the regulator can effectively monitor for market abuse, they need to receive complete and accurate information from firms about the types of instruments, when and how they are traded, and with whom. This helps to underwrite market integrity and aid in the FCA’s supervision of firms – and in particular helps them to combat financial crime and identify potential instances of market abuse.

Commenting on Goldman’s fine, Mark Steward, the Executive Director of Enforcement and Market Oversight at the FCA said:

“The failings in this case demonstrate a failure over an extended period to manage and test controls that are vitally important to the integrity of our markets. These were serious and prolonged failures.”

Action for Other Firms

Other firms should take note of these fines and heed them as warning and opportunity to ensure they are regularly checking their existing transaction reporting processes and procedures to ensure they are complete, accurate and compliant with current regulation.

Furthermore, firms that are currently preparing for regulatory change, such as preparing for the Senior Managers & Certification Regime (SM&CR) that will affect solo-regulated firms in December, should take extra care to ensure all aspects of their processes and procedures affected by rule changes are suitably reviewed and any necessary alterations implemented to remain compliant.

If you would like any support or assistance in undertaking a review of your transaction reporting arrangements or any other aspect of your regulatory reporting or firm’s compliance, our professional friendly compliance support team would be happy to help.

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