Goldman Sachs and HSBC, along with Barclays, BNP Paribas, and another bank, have joined forces to adopt a common global approach to disclosing clients’ stock positions. The group aims to minimize the risks of under-reporting, particularly in the case of short bets or derivative-based positions. Regulators require investors to report their securities holdings when certain thresholds are breached, but interpretations of the rules can vary, leading to missteps and penalties. The consortium, working with RegTech specialist Droit, is developing a tool called Endoxa to streamline efforts and increase transparency, thus reducing costs and ensuring consistent compliance.
The initiative, led by Goldman Sachs, is the first bank-led consortium aimed at tackling global rules on disclosure reporting. The lack of commonality in understanding the rules across different banks raises concerns about potential inaccuracies in market data relied upon by the public. By creating a common digital machine-readable code, consortium members can implement a standardized approach to compliance. The goal is to reassure regulators and legislators that rules are being applied consistently and to create a level playing field for retail investors.
While the consortium members will still be able to assist clients in building positions confidentially, they will work with lawyers and regulators to agree on a precise interpretation of the disclosure rules. The partnership between the banks and Droit is seen as a step towards reducing risk and enhancing safety within the industry. However, some experts caution that regulators should scrutinize such collaboration and ensure appropriate oversight, as it may be inappropriate for banks to collectively decide on rule interpretations.
In summary, the group of five banks, including Goldman Sachs and HSBC, is collaborating to adopt a standardized approach for disclosing clients’ stock positions. The aim is to reduce the risks of under-reporting and increase transparency in compliance with regulatory requirements. By partnering with RegTech specialist Droit, the consortium is developing a digital code that will ensure consistent application of the rules across different banks. The initiative, called Endoxa, aims to create a level playing field for retail investors and provide reassurance to regulators and legislators. While there are concerns about collective interpretation of rules, the partnership is expected to enhance risk management and make the industry safer.