Traceability and Accountability

Firms commonly ask what “good governance” should look like in terms of transaction reporting structure. In short, there is absolutely no one way of doing this.

Irrespective of the size of the firm, good governance starts at the top and “filters down” through a traceable line of discussion and actions.

Transaction reporting governance structures are varied. Larger firms may have elaborate architectures, spanning as many as five or more governance layers and encompassing as many as ten or more committees. Conversely, smaller firms might operate efficiently with less than four layers. The existence or absence of a dedicated committee for “Transactional Reporting“ fluctuates based on the organisation’s size, trading arrangements, asset classes and product types as well as their unique operational nuances.

However, irrespective of the organisational structure, at the heart of good governance is Traceability and Accountability

From an operational standpoint, teams in charge of monitoring transaction reports should have clearly documented procedures and protocols for “exception handling” and escalation. These protocols are not mere administrative formalities but are instrumental in triggering in-depth investigations supported by front-line assistance whenever anomalies surface or the quality of reporting is questioned.

When a transaction reporting “concern” extends beyond the daily, routine management of reporting flow, it becomes an “issue” that should be logged, owned, and tracked to resolution. “Issues” may evolve from multiple points along the chain – whether it arises from daily operations, questioning from stakeholders, or externally-triggered by a counterparty or regulator.

The first link in the chain is documenting the issue. As the issue works its way through the chain of escalation, individuals, operating under defined roles and responsibilities, will be charged with reviewing, escalating or managing the issue. This forms the foundation for accountability.

Having clear, documented lines of responsibility and traceable lifecycles of each issue helps build confidence that the reporting falls under good governance.

In the event the regulator makes enquiries into the reports, there will be documentation that illustrates where the issue was discussed, who was involved, who was the most accountable or responsible person in the chain, and how the issue was remediated.

The importance of accountability is evident in the FCA's MiFID II transaction reporting errors and omissions notification, which mandates firms to specify details of their governance framework. This includes identifying the individual responsible and any committee remarks overseeing the regime. Ensuring that you have mechanisms in place to capture this information is vital for providing the necessary details to regulators.

"Accountability" permeates the organisational hierarchy, ensuring that each stratum, from the executive board to mid-management, is integrally involved in fortifying the system’s controls framework. Demonstrating that somebody within the firm owns and is responsible for transaction reporting is central to demonstrating accountability.

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