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MiFID gives most firms a headache

Record-keeping bamboozles, survey finds

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Firms across Europe have just two weeks to comply with a law that aims to create a single European market for financial services. But most are struggling with the directive's record-keeping duties, according to survey findings published today.

The Markets in Financial Instruments Directive (MiFID) harmonises the regulatory regime for investment services across the 30 member states of the European Economic Area (the 27 Member States of the EU plus Iceland, Norway, and Liechtenstein).

Article 51 of MiFID (pdf) demands the retention of certain records by financial firms for at least five years. Others must be kept for the duration of the relationship with a client. A firm's retention must be in a manner that allows national regulators "to access them readily and to reconstitute each key stage of the processing of each transaction".

This causes a problem for firms, according to the independent think tank JWG-IT. It claims that 64 per cent of financial firms say they cannot reconstruct events after the fact in reasonable timeframes or cost levels.

PJ Di Giammarino, CEO of the London-based group, warned that if record keeping is done incorrectly, it could falsely trigger or hide market abuse issues.

"If you get caught out with it wrong, it could cost you hundreds of thousands of euro in fines," he said. "If what you have given to the regulators, the market, and your customers does not match what you hold internally for up to five years from 1 November, you are exposing yourself to new risks.

"Record keeping is a big problem and we are working with the industry to make senior management more aware of their new responsibilities under a principles based regime."

JWG-IT is appearing at the Storage Expo, at Olympia, London, this week.

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OUT-LAW.COM is part of international law firm Pinsent Masons.

Related link

Minimum records that the FSA requires UK investment firms to keep (pdf)

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