Merrill Lynch today became the first investment firm to be fined for a breach in EMIR Reporting. Fined by the UK’s Financial Conduct Authority (FCA), Merrill Lynch will be paying £34.5 million. According to the FCA, the enforcement was due to failures to report details correctly of exchange traded derivatives (ETDs).
Put in effect in 2014, EMIR reporting is a EEA based derivative reporting requirement that falls on both investment firms and non-financial companies. Until today, the sole enforcement was a $64,000 fine on DTCC and their Trade Repository. However, no reporting entity had been punished yet by financial regulators for either failing to report or providing incorrect information.
The fine answers the question of whether punishments are coming to EMIR. Specifically, with MiFID II going into effect in January 2018, many firms wondered whether financial regulators would wait until the new regulation is live before reviewing reporting adherence.
Winds are changing
The Merrill Lynch fine though, does fit into a general regulatory view towards EMIR. New brokers and investment firms have reported that regulators such as the FCA have made the approval of their licenses contingent on having an EMIR reporting process in place before going live.
The FCA specifically has allowed itself a lot of room to issue fine. Unlike other countries, of which their regulators applied maximum punishment amounts, in the UK, the is allowed to impose penalties as they deem fit (list of potential fines by country)
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