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The Governance Gap: Why Businesses Must Strengthen Derivative Reporting Assurance
Robust governance and internal controls are fundamental necessities in the complex financial regulation landscape. This is particularly true for derivative trade reporting, especially following the significant ASIC rule changes in October 2024.
While the industry adapts, a critical observation from the regulator highlights a concerning “governance gap”: many businesses are not adequately identifying and addressing reporting weaknesses through their own compliance arrangements. According to a presentation by ASIC Senior Analyst, Craig McBurnie, at an industry event on 1 April 2025, titled ‘ASIC OTCD trade reporting Hotspots and Blackspots’, this lack of internal checking is a significant concern.
This article explores this gap, explains why proactive self-checking and assurance are vital for defensible reporting, and discusses foundational elements for robust oversight.
The Regulator’s View:
Why Self-Checking Matters to ASIC
ASIC’s recent observations underscore a clear point of frustration: despite updated rules, fundamental reporting issues persist, some predating the 2024 changes.
The ASIC presentation highlights the concern, why are businesses not catching these errors themselves? ASIC views you as the first line of defense for accurate and complete derivative trade submissions.
When there is a failure to identify reporting weaknesses, it potentially signals inadequate internal oversight, increasing regulatory risk.
Historically, many businesses assumed reporting accuracy without external validation or simply waited for regulatory queries – an outdated practice directly contradicting ASIC’s expectation of proactive internal controls.
The Governance Framework:
Foundation for Assurance
Building a robust governance framework for derivative trade reporting is the essential foundation for effective internal assurance. This framework ensures reporting processes are designed correctly and operate consistently and accurately. A strong framework includes:
A well-defined governance framework empowers businesses to move from reactive to proactive, identifying issues before they become regulatory problems.
Key Areas Requiring Internal Assurance and Self-Checking
Within a robust governance framework, specific areas of derivative trade reporting demand diligent internal checking.
While a subsequent article will detail specific ASIC-identified pitfalls, proactive self-checking is critical in areas like core data elements, identifier validity (LEIs, UTIs), transaction terms, lifecycle events, managing validation errors, ensuring timeliness, and addressing legacy data.
Building strong internal processes here is paramount.
Building a Culture of Assurance
Beyond frameworks, fostering a culture of assurance is vital. This means embedding a mindset where accuracy, completeness, and proactive error identification are prioritised at every level.
Clear communication from leadership on compliance importance and data integrity is required.
Investing in ongoing training for operational teams is crucial, providing knowledge to understand rules, recognise issues, and escalate appropriately within your governance structure.
How Resolve DTR Supports Enhanced Governance and Assurance
At Resolve DTR, we understand effective governance and proactive assurance are key concerns for AFSL holders.
Our managed operations service and the underlying KOR Financial platform are designed to develop and support a strong internal governance framework.
We provide transparency, accessible audit trails, and detailed reporting/dashboards for visibility into submission status, validation results, and potential issues.
While we handle reporting complexities, our platform and service model support your oversight, easing implementation of robust controls and effective self-checking. Our expertise strengthens your internal efforts; together, we establish and maintain strong governance practices for your OTC Derivative Trade Reporting.
Conclusion
ASIC’s observations are a clear call to action: businesses must strengthen their own derivative trade reporting assurance processes.
Closing the governance gap is essential for truly defensible reporting, mitigating risk, and maintaining trust with the regulator.
By establishing a robust governance framework, focusing on key areas for internal checking, and fostering a culture of assurance, AFSL holders take control of their compliance destiny.
Understanding specific error areas is the next step, and our following article will detail these ASIC-identified pitfalls and provide actionable strategies.
Ready to strengthen your derivative trade reporting governance and assurance? Learn how Resolve DTR provides the tools, transparency, and expertise to support your robust oversight framework. Visit our site or contact us for a consultation.
