What is regulatory reporting?

Regulatory reporting is how a company demonstrates its financial and operating activities comply with various standards and regulations as part of its financial reporting process. And in the context of the regulatory reporting process, companies must submit their reports to the relevant governing body for review.

However, it's important to note that the specific governing body can vary depending on the jurisdiction and the nature of the company's activities. For example, in the United States, companies might submit these reports to the Securities and Exchange Commission (SEC) or the Federal Reserve.

What are the goals of regulatory reporting?

The goal of regulatory reporting is to improve transparency in companies’ financial and operating activities, regardless of where they operate. Regulatory reporting also helps establish trust between competitors in the same industry, as they can be confident that other companies are adhering to the same standards.

Investors and stakeholders also stand to benefit from precise and up-to-date information on an organizations’ financial health via regulatory reports, so they can make more informed decisions. In addition, regulatory reporting can help finance leaders effectively identify and manage risk, supporting the long-term sustainability of an organization.

What happens if you don't follow regulatory reporting guidelines?

Companies that don’t follow regulatory reporting guidelines are at risk of financial penalties, reputational damage, limitations on their activities, additional barriers to approval, or even imprisonment. For example, BMW was fined €8.8 million by South Korea in 2018 for failing to comply with recall regulations.

In addition, non-compliance can lead to other indirect costs, including time and resources on legal consultations, investigations, and remedial actions. Non-compliance could also result in loss of consumer trust and business opportunities.

In addition to financial penalties and legal repercussions, non-compliance can lead to the devaluation of a brand, reduced profits, difficulties in securing investments, and an increase in the cost of capital.

What does someone who works with regulatory reporting do?

Regulatory reporting analysts are responsible for documenting key processes, regulations, and procedures that relate to the preparation of financial and operational reports. Overall, regulatory reporting analysts play a key role in maintaining and improving the integrity of the global financial system.

Their work often includes the interpretation of new regulatory requirements, the implementation of changes to reporting processes, and the validation of data used in regulatory reports. Regulatory reporting analysts may also work with auditors and regulatory agencies, participate in compliance-related projects, and provide training or guidance on regulatory reporting matters within their organization.

Regulatory reporting guidelines

As mentioned earlier, regulatory reporting guidelines are determined by a company’s activities and jurisdiction. Let’s dive into each jurisdiction’s unique regulations:

US guidelines

In the United States, both private and public companies are subject to regulatory reporting guidelines. Here's a brief overview:

• Public companies: Public companies listed on exchanges like the NYSE (New York Stock Exchange), or NASDAQ must file audited annual reports and quarterly reports with the Securities and Exchange Commission (SEC).
• Continuous disclosure: The SEC's continuous disclosure requirements mandate that public companies regularly make certain information about their activities and financial status available to the public.
• US GAAP accounting standards: All publicly traded companies are required to follow US GAAP (Generally Accepted Accounting Principles), which provide a common set of accounting standards, principles, and procedures.
• Private companies: While less regulated than public entities, private companies still have reporting obligations. They may need to provide financial statements to lenders, investors, or government agencies depending on their size and nature of operations.
• Privacy guidelines: Both private and public companies must comply with various federal and state privacy laws which include requirements for handling and reporting on personal information.

Canada guidelines

In Canada, both private and public companies are also subject to regulatory reporting guidelines. Here’s a breakdown:

• Public companies: Public companies listed on exchanges like the TSX (Toronto Stock Exchange) or Cboe Canada must file audited annual comparative financial statements. Venture exchanges such as the TSX-V and CSE require annual audited statements within 120 days of each financial year and quarterly statements within 60 days of the quarter end.
• Continuous disclosure: Companies that are reporting issuers in Ontario must regularly make certain information about their activities and financial status available to the public.
• IFRS accounting standards: All publicly accountable entities are required to follow IFRS (International Financial Reporting Standards), though Canadian securities regulators provide an option for certain entities.
• Private companies: On March 22, 2023, the Government of Canada tabled legislation requiring private federal business corporations to report beneficial ownership information.
• Privacy guidelines: Both private and public companies must comply with the Personal Information Protection and Electronic Documents Act (PIPEDA), which includes requirements for handling and reporting on personal information.

EU guidelines

In Europe, private and public companies are subject to a robust set of regulatory reporting guidelines. Here’s an outline:

• Public companies: Public companies listed on exchanges like Euronext or London Stock Exchange must file audited annual comparative financial statements in accordance with the European Central Bank (ECB) requirements, which aim to maintain financial stability in the Eurozone.
• Continuous disclosure: Similar to Canada, companies that are reporting issuers in Europe must regularly make certain information about their activities and financial status available to the public under the Markets in Financial Investments Directive II (MiFID II).
• IFRS accounting standards: All publicly accountable entities in Europe are required to follow IFRS (International Financial Reporting Standards), under the ECB guidelines and Solvency II directive for insurance companies.
• Private companies: Private companies are subject to various reporting requirements under the Alternative Investment Fund Managers Directive (AIFMD), which imposes reporting requirements related to risk and liquidity management, conflicts of interest, and transparency to investors.
• Privacy guidelines: Both private and public companies must comply with the General Data Protection Regulation (GDPR), which includes requirements for handling and reporting on personal information, like PIPEDA in Canada.
• Additional regulations: Additional regulations such as the European Market Infrastructure Regulation (EMIR) and the Securities Financing Transactions Regulation (SFTR) mandate the reporting of details of derivative contracts and securities financing transactions respectively, to increase transparency and reduce systemic risk.

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Benefits of regulatory reporting

There are many benefits of regulatory reporting, many of which can improve your business’ financial and operational health.

Uphold positive brand reputation

First, and perhaps the most obvious benefit of regulatory reporting, is that it’s the law. Because of that, when you effectively comply with your area’s regulations, you are maintaining your brand’s positive reputation, improving visibility into your operations for better internal management, and allowing third parties to make data-driven decisions about involvement with your business.

Maintain trust with advisors, stakeholders, and the public

When advisors, stakeholders, and the public have access to your regulatory reports, they can better understand the state of your company’s financial health, Regulatory reports can also be beneficial for companies looking for an investment or to sell their business, as it gives investors visibility into potential risks, and your financial and operational standing.