They say change is good, and in the case of MiFID, the new EU regulatory regime that will affect investment services firms across the 27 EU member states, it certainly can be, but it will take some work — now. For, while the first compliance deadline fell in November 2007, many firms are still unprepared. And it’s no wonder.
MiFID is ambitious — it aims to make the compliance process more transparent and to create a single EU market for investment services, thus spurring competition, enabling cross-border services, and ultimately protecting investors.
Rethink and retool – or regret
Yet, all this is easier said than done. Because MiFID requires fundamental changes in the way firms process data and maintain records, the bar to entry is high. To achieve MiFID compliance, companies will have to prove ‘best execution’ on all deals and keep all transaction-related records for five years. Given that many firms currently trade off-book and don’t have systems in place to record and store this information, this is indeed daunting.
In short, for most companies, MiFID requires a massive overhaul in Information Technology (IT), a task that British analysts are predicting will cost the financial services industry approximately £1bn or €1.345bn. Every firm is scrambling. Thirty percent of EU firms surveyed said that they plan to spend 10 to 20 percent of their annual IT budgets on MiFID compliance and more than 20 percent said that they will be spending more than 20 percent.
The risks of non-compliance
While the figures seem high, they’re not out of range. Costs for IT escalated with the introduction of Sarbanes Oxley and Basel II. Nonetheless, when compared to the potential costs of non-compliance, from a loss in business to a loss in reputation, the investments will be worth it.
History bears this out. Recent penalties for non-compliance include a total of $8.25m (€5.6m) in fines paid in 2002 by five of the largest investment banks in the world for failure to show proper document retention and a 2004 fine by the SEC of $10m (€6.788m) on a top retail bank for being unable to produce appropriate records across all mediums of communication.
What’s more, statistics show that for every $1 paid in penalty, firms lose an estimated $10 – $20 or €6.8 – €13.6 in new business. Conversely, the General Counsel Roundtable reports that for every $1 spent on compliance, companies save $5.21 or €3.54 due to increased efficiency and transparency, and avoidance of legal liabilities.
An integrated solution
Whether or not MiFID will result in more competitive business landscape or simply a less crowded playing field remains to be seen. However, one thing is certain: the firms that can get their house in order in terms of processes, compliance, and security will ultimately realise benefits not only for their business but also for the environment.
The key is an integrated approach and a good partner, and that’s where Hewlett-Packard comes in. HP’s Compliant Document Capture is a vertically integrated, bundled solution of HP multifunction printers, Scanjet scanners, software, and services ideal for firms seeking MiFID compliance. It not only consolidates document workflow and increases information security, it also creates a more environmentally friendly organisation by reducing paper and energy consumption.
Efficient, effective, secure
To visualise Compliant Document Capture in action, consider a typical trade. Currently 35 to 45 minutes pass from the time a customer requests a trade to its execution as the document goes from email to fax to filing to fax again. At each stage of the transaction, eight to 12 documents are generated for a total of roughly 15 to 25 pages, each of which must be generated, tracked, and retained.
HP’s Document Capture, on the other hand, takes information from order to execution in just 10 to 15 minutes, automatically scanning, electronically storing, and properly routing it, not only saving the company time, money, and paper, but also creating an audit trail and increasing information security for the firm and client alike.
Winning the paper chase
An end-to-end solution, HP’s Document Capture includes cutting-edge digitising devices and software, all supported by services that assess, design, and implement ongoing maintenance for all systems.
Hewlett-Packard’s Compliant Document Capture solution for Financial Services covers nearly all document intensive workflows including opening new accounts, letters of authorisation, tickets and confirmations, disbursement documents, portfolio accounting, maintaining and providing performance information, new account funding, withdrawals, and account terminations.
The key to success
For over 30 years, HP has been designing multi-function solutions for 130 of the world’s top stock and commodity exchanges, all of the top 200 US banks, and the top 50 US brokerages, developing leading-edge technology for handling credit card transactions, electronic funds transfers, and enterprise solutions. For example, recently HP’s multi-function solutions, including workgroup printing across multiple capabilities, were used to lower total cost of ownership (TCO) by 20 to 30 percent for a European retail bank.
To increase efficiency and security for the credit card division of UK’s Coventry Building Society (CBS), HP in conjunction with one of it’s Solutions Business Partners, BlueMega Technology Ltd, worked with CBS to replace its multi-part PIN dissemination and printing process with a tamper-evident, secure process linking HP printing and imaging devices directly to an encryption device. In both cases, the systems are linked to disaster recovery sites, a key element of any mission-critical application, and are scalable so that they can evolve with business needs.
Streamlined and green
In addition to streamlining business processes and increasing efficiency, HP’s integrated solutions also increase companies’ environmental sustainability while cutting costs, increasing productivity, and saving space. An internal study at HP showed that by using HP’s Universal Print Driver (UPD) to configure company printers for two-sided or duplex printing, the company saved up to 800 tonnes of paper for an annual savings of $7.7m (€5.2m).
Further, HP’s Laser Jet Printers with Instant-On Technology can save up to 50 percent on energy consumption per year, yet they print pages four times faster than competitive products. The company’s space-saving Multifunction Printers use 40 percent less energy and supplies than comparable stand-alone devices. Similarly, HP’s Web Jetadmin, a print and image managing software, reduces fleet power and paper consumption with pre-set wake and sleep modes, ongoing monitoring of duplex printing rates, and automatic management of under-utilised devices.
All HP packaging is 100 percent recyclable, and customers can take advantage of the company’s free Planet Partners programme for environmentally responsible disposal of used ink cartridges and toner and for re-sale or re-use of used equipment. To date, this program has recycled over £1bn of electronic equipment, a figure projected to increase to £2bn by 2010.
Turn change into opportunity
All this means, in short, that change is good for firms needing to achieve MiFID compliance. And the timing is perfect: while studies show that energy costs make up 10 percent of the average IT budget, these costs are projected to rise to as much as 50 percent in a matter of years. Given that, it’s clear that the choices firms make today can mean the difference between profitability, productivity, and sustainability or penalties, lost business, and mounting costs. Choose to save — money, time, and energy. Choose an integrated solution and choose your partner wisely. Again, that’s where Hewlett-Packard can help turn change into opportunity.