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Purchasing regulatory software? The 7 things that should be on your checklist

MiFID II, and its accompanying regulation MiFIR, going into effect in January 2018, improved transparency for investors, but at the same time, greatly increased the burden for firms on the reporting front. In addition, the forthcoming General Data Protection Regulation (GDPR) – coming into force on 25 May, 2018, across the EU – will further complicate things with its stringent new privacy regulations to protect personal data.

Many firms might be in a position where they’re complying with multiple regulatory regimes – Solvency II (reporting to EIOPA), Annex IV of AIFMD, COREP/FINREP under Basel II reporting to the EBA, and the US FATCA requirement. Here is what you may typically be filing:

  • Trading date and time
  • Instrument identification code
  • Price
  • Venue of execution
  • Price currency
  • Quantity
  • Publication date and time
  • Venue of publication
  • Transaction identification code

If firms are to file on time, with ease and without errors, using a reporting platform that can handle multiple regulatory requirements is essential – given that reporting has become industrialised in scale and scope. Last year, EIOPA discontinued its free Solvency II Pillar 3 reporting software, and Tool for Undertakings (T4U), which had been widely used and not just for insurance reporting. Software providers have moved in quickly to fill the gap. Many now also offer a platform for the new AnaCredit credit risk regulation.

The new platforms use XBRL – the global standard reporting language that is universally used to exchange financial information. But with so many providers to choose from, what should you look for to ensure all your needs are covered

1. Ease of use

This is surely a no-brainer – a platform must be simple to use, and intuitive in the way it works. Any platform worth its salt will make it as easy as possible for a firm to input all the required data in the right formats, often for multiple filing, while guiding you through the process. Most people are familiar with spreadsheets and the best XBRL platforms use an XML interface that looks like a spreadsheet and makes it easy to import or export data, or enter it manually. Most firms also need the option for multiple users to access the platform simultaneously.

Many users have said that the new XBRL platforms are more user-friendly than EIOPA’s T4U tool, as well faster and more efficient.

2. Customisability

With so many reporting requirements demanded by the regulators, it can be tempting to go for the cheap option – a simple one-size-fits-all platform that costs little and enables you to just tick the boxes every day, week or quarter to avoid being fined for non-compliance.

But it’s wise to look for a platform that allows you to customise as much of your data as possible. It’s worth investing more, because when you have a system that enables you to view your data granularly, it adds value to your firm far beyond just the obligation to report. Being able to drill down will give you insights into your transaction trends, enabling you to plan for future business, and also benchmark the quality of your reporting.

3. Templates

A good platform will have a huge variety of customisable templates that simplify reporting. Examples include being able to specify rules to automatically generate regulatory documents, and being able to define geographies and specifying primary regulatory rules to determine and calculate properties or values. You should be offered templates for reporting requirements for weekly aggregate reports, daily position reports, daily participant reports and daily OTC reports, among others. Platforms usually offer free trials, so you can see for yourself if they offer the templates you need. And you’ll also be able to test validating your data-filled templates against the various validation rules of the regulators.

4. Agility

If you’re aggregating source data from different locations and different systems, your reporting system needs to be capable of integrating and consolidating all that data into one report – quickly and accurately. An agile platform will also be adaptable to any new reporting requirements. Make sure your platform provider updates their software to incorporate any and all ongoing changes in regulatory reporting, as part of their mission to make reporting as effortless as possible.

You should also be looking for speed hacks like:

  • The ability to import from and export to MS Excel
  • Templates for QRTs, including for country-specific requirements
  • The ability to generate XBRL reports compliant with EIOPA taxonomies
  • Being able to store current and past EIOPA taxonomies
  • Compliance with taxonomies for Solvency II, IFRS and CRD IV
  • Advanced validation mechanisms for checking reports across taxonomy requirements

Collaborative tools for your team – enabling everyone to work together to collect and share information – should also be a major consideration. Options such as wikis and message boards can be used to keep team members and management up to date on risks, exposures and regulatory metrics.

5. Checks and controls

Administrators should be able to control who has access to your reporting platform, with various levels of authority and permissions. Key decision-makers must be accountable for the final generated reports before they are submitted to the regulator. To reduce operational and reputational risks, pick a platform which enables you to formulate and control the processes for your team. A good system will allow collaboration, comparison of versions, and reviewing of and commenting on entries. So you want a platform that offers digital rights management, version control, and auditing trails among the reporting tools.

6. Managed services

The biggest banks and insurers usually have regulatory reporting software installed on-premises, but smaller firms find that using a managed service is a better and more cost-effective option. A managed service means the platform takes responsibility for storing data, dealing with hardware maintenance and software upgrades, backups, disaster recovery and other logistical upkeep.

7.Customer support

Even the most user-friendly platforms can occasionally confound users, so full support from the software vendor’s technical team is ideal – preferably 24/7 – if your firm has multiple locations across different time zones. Do your homework and check out the performance of their support. How long has the platform been operating? How many firms have they serviced, and how many reports have they typically filed on behalf of those firms? Look around a little for customer comments; Google is your friend. The combined info will give you more to go on: whether you want to discuss with a particular provider about filing your reports for you.