Following a series of FSA actions relating to transaction reporting failures, many firms will have revisited their own transaction reporting procedures to ensure that they satisfy regulatory requirements. Portfolio managers that have been relying on the exemption in SUP 17.2.2G may have been concerned as to the level of due diligence expected of them in order to benefit from the exemption.
Market Watch 35 has a section devoted to transaction reporting including the exemption mentioned above. The FSA confirms that a portfolio manager relying on the exemption only needs to satisfy itself that the broker is a MiFID investment firm and that “the portfolio manager is not required to conduct due diligence to ensure that reports are being submitted accurately …”
The article reminds brokers that when they are completing a transaction report where the client is a portfolio management firm, the report should identify the portfolio management firm – using either its FSA Reference Number (“FRN”) or its BIC (see below) – and not the underlying funds.
Firms that do transaction report, including portfolio managers not able to take advantage of SUP 17.2.2G, are encouraged to regularly review the integrity of the data submitted. Firms can request a sample of transaction reports by completing an online form (further details are in Market Watch 35).Comment is made that some firms are failing to submit transaction reports about securitised derivatives (SUP 17.1.4R concerns which transactions need to be reported).
Elsewhere the FSA reminds us that all MiFID investment firms need to have a BIC (see Regulatory Roundup #11).It should be noted that whilst a BIC code consists of either eight or eleven alphanumeric characters, the FSA system can only validate eleven character BICs. As such ‘XXX’ should be added to eight character BICs.
The FSA has announced its intention to remove the option of identifying entities with an FRN at some time in the future; no date has yet been set.
Market Watch 35 should be read in conjunction with the Transaction Reporting User Pack published last September.