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MiFID II penalties quadrupled to €8.4 million in 2020

ESMA’s latest report reveals a substantial surge in penalties and corrective actions linked to MiFID II non-compliance across Europe in 2020 when compared to the previous year. Here are some key findings from the report:

  1. Quadrupled Sanctions: The number of sanctions and remedial actions, as imposed by national competent authorities (NCAs) across Europe, experienced a fourfold increase in 2020 compared to 2019, specifically due to MiFID II shortcomings.
  2. Total Sanctions: In 2020, NCAs administered a total of 613 sanctions and corrective measures, cumulatively amounting to €8.4 million. These actions were spread across 23 out of the 30 European Economic Area (EEA) member states.
  3. Year-on-Year Analysis: This data signifies a noteworthy upswing from the prior year, during which only 371 sanctions and corrective measures were issued by NCAs in 15 member states, with a combined value of €1.8 million.
  4. Compliance Challenges: The surge in sanctions and corrective measures underscores the formidable compliance challenges that market participants confronted in adhering to the intricate demands of MiFID II, especially concerning data management and reporting.
  5. Pressured Compliance Systems: MiFID II’s primary objective of enhancing transparency in products sold to end investors necessitated the rapid availability of substantial data, thereby exerting significant pressure on compliance systems to handle an unprecedented volume of information.
  6. DTCC Derivatives Repository Fine: The report references a recent fine of €408,000 levied against DTCC Derivatives Repository due to data breaches related to the European Market Infrastructure Regulation (EMIR).
  7. Reporting Errors: A study by ACA in June revealed that nearly all firms were inaccurately reporting transactions under MiFIR regulation, with a majority unaware of these inaccuracies.
  8. Call for Standardized Solutions: The surge in penalties serves as a clarion call for financial institutions to reconsider their approach to reference and market data. The report advocates adopting standardized and scalable solutions to extract requisite information for MiFID II compliance.

In conclusion, the substantial increase in penalties and corrective actions pertaining to MiFID II non-compliance in 2020 underscores the formidable regulatory hurdles encountered by market participants in fulfilling the transparency and reporting prerequisites of the regulation. It also highlights the necessity for more efficient and standardized data solutions to ensure compliance.