Shifting Tides in Recording Private Securities Transactions

The German Securities Trading Act (WpHG) mandates financial institutions to scrutinize private securities trading by their employees, preventing insider trading and market manipulation. This scrutiny extends to trading orders processed at third-party banks, such as neo brokers, which are required to report transactions to the employer bank. Typically, reports are conveyed via post, email PDFs, or fax, with compliance teams manually entering data from duplicates – a time-consuming process prone to errors.

The Duplicate Dilemma Amidst a Share Boom

According to the Deutsches Aktieninstitut (DAI), the number of private investors in shares, equity funds, and ETFs reached 12.3 million in 2023. Shareholder numbers remain stable above the 12 million mark for the fourth year in a row.

The surge in private investors has led to a corresponding uptick in trading activities among bank employees. Compliance teams are grappling with a growing number of duplicates. The confluence of factors, including the allure of shares during a zero interest rate phase, and the rise of user-friendly trading platforms, has intensified the challenge.

Source: Deutsches Aktieninstitut (Germany)

Digitalization as the Panacea

In response to escalating challenges, financial institutions are under mounting pressure to enhance the efficiency of duplicate recording processes. The absence of a standardized process or format for sending duplicates compounds the issue, with reports arriving as PDFs or letters necessitating manual data entry. The imperative solution lies in digitalization, offering extensive automation to alleviate the burden on compliance teams.

5 Steps Toward Digital Compliance

  1. Digitization of Duplicates: Scanning paper reports or filing received PDFs.
  2. OCR Integration: Utilizing Optical Character Recognition with templates to minimize errors during data mapping.
  3. Automated Check Routines: Identifying incorrect or missing entries through automated checks.
  4. Plausibility Checks: Automated processing for transactions passing plausibility checks.
  5. Rule-Based Checks: Employing rules and regulations to scrutinize for market manipulation or insider trading.

Digital Duplicate Capture: Unlocking Efficiency

Pilot projects in financial institutions reveal that automated scanning, data mapping, and plausibility checks can slash manual efforts in duplicate capture to approximately 10%. Additionally, automation in subsequent checks for insider trading or market manipulation contributes to further efficiency gains.

Compliance against insider trading: duplicates procedure

Conclusion: The Imperative of Digital Evolution

The digitalization of the duplicate process emerges as a critical step for financial institutions to ease the burden on compliance departments and meet stringent regulatory requirements. The manual processing of duplicates, proven to be time-consuming, costly, and error-prone, is no longer sustainable. With share trading by private investors and bank employees reaching new heights, embracing digital solutions becomes imperative for financial institutions navigating this dynamic landscape.

ePaper: Digitisation in Duplicate Documentation

ePaper: Digitisation when checking staff’s private share deals

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