The Financial Conduct Authority (“FCA”) has clarified its supervisory approach to risk mitigation requirements for non-cleared over-the-counter derivative transactions relating to portfolio reconciliation, dispute resolution and portfolio compression under Regulation (EU) No 648/2012 on OTC derivatives, central counterparties and trade repositories (“EMIR”).
The FCA expects firms that have to date not been complying with the portfolio reconciliation, dispute resolution or portfolio compression requirements, which became effective on 15 September 2013, to have a detailed and realistic plan to achieve compliance within the shortest time-frame possible.
The FCA expects that such plans will be completed and implemented by 30 April 2014 and that firms must be in a position to demonstrate compliance after this deadline.
Penalties for non-compliance
The FCA may impose a financial penalty on non-complying parties and is under an obligation to publically disclose each penalty (unless such disclosure would seriously jeopardise the financial markets or cause disproportionate damage to the parties involved).