Common RegData errors and how to avoid them in 2026

Common RegData errors and how to avoid them in 2026

The FCA’s RegData platform — which replaced Gabriel for regulatory return submissions in October 2022 — has been the submission vehicle for MIFIDPRU returns since the regime came into force in January 2022. Three years into the new prudential framework, the errors that regulated investment firms make in their submissions have become reasonably consistent. Some are technical — formatting issues and validation failures that prevent a submission completing. Most are substantive — methodological errors in the calculation of K-factors, own funds deductions and fixed overheads that result in incorrect capital requirements being reported to the FCA.

This article sets out the most common errors the Head of Regulatory Reporting and the finance function need to guard against in 2026, and the practical steps that prevent them recurring.

Firm classification errors

The most consequential error category is misclassification of the firm as Class 3 when it meets one or more of the Class 2 thresholds. Class 2 thresholds under MIFIDPRU include: assets under management exceeding £1.2bn, client orders handled exceeding £100m per day on a rolling average, assets safeguarded and administered exceeding £1.2bn, own account dealing generating net revenues above a specified threshold, and balance sheet assets exceeding £100m.

A firm that has grown past one of these thresholds without actively reviewing its classification will be submitting simplified Class 3 returns and calculating capital on a simpler basis than MIFIDPRU requires. The risk is not just of an incorrect submission but of systematic undercapitalisation relative to the regime’s requirements. The Head of Regulatory Reporting should confirm the firm’s classification at each year end and whenever a material change in the firm’s business model or size occurs — not only at the initial MIFIDPRU implementation point.

K-AUM averaging methodology

The K-AUM K-factor uses a rolling 12-month average of the firm’s assets under management, recalculated quarterly. This is the most common source of methodological error for asset management firms within the MIFIDPRU regime, and it occurs in two ways.

The first error is using a point-in-time AUM figure at the quarter end rather than the 12-month average. This is a meaningful difference for firms whose AUM is seasonal or variable — a point-in-time figure at a high point overstates the K-AUM requirement; at a low point it understates it. The requirement is explicit: the average must be calculated over the preceding 12 months using monthly data points.

The second error is using the wrong AUM definition. MIFIDPRU’s definition of assets under management for K-AUM purposes includes portfolios managed on a discretionary basis but excludes assets where the firm provides only advisory services without discretion, assets held in collective investment schemes where the firm is not the AIFM or UCITS manager, and certain other categories. Firms that manage both discretionary and advisory mandates need to apply the definition carefully and ensure their AUM data systems segregate the relevant categories.

Fixed overheads requirement adjustments

The fixed overheads requirement is calculated as one quarter of the firm’s audited relevant fixed overheads, after applying MIFIDPRU’s prescribed adjustments to the total expenses figure in the accounts. The adjustments are the source of most FOR errors.

MIFIDPRU requires the removal from total expenses of: staff bonuses and other remuneration that are wholly discretionary; profit participations paid to employees and partners; payments to tied agents; fees paid to third-party introducers where those fees are commission-based rather than fixed; expenses charged to clients and recovered in full; one-off expenses of a non-recurring nature; and certain intra-group charges where the group provides services at cost. Applying each of these adjustments correctly requires the Head of Regulatory Reporting to work through the firm’s cost base line by line with reference to the contractual arrangements underlying each expense category.

The most common specific error is the treatment of discretionary bonuses. MIFIDPRU removes wholly discretionary bonuses — those where the firm has genuine discretion to pay zero — but not bonuses that are contractually guaranteed or subject only to a formulaic performance condition that creates a legal entitlement once the condition is met. The distinction requires legal review of the relevant employment contracts and bonus plan rules, not a simple categorisation of bonuses as “discretionary” on the face of the payroll data.

Own funds deductions

The MIF001 own funds return requires the application of MIFIDPRU’s deduction framework to the firm’s accounting equity. Errors in the deduction calculation are among the most common substantive errors in MIFIDPRU submissions.

The deductions prescribed by MIFIDPRU 3 include: goodwill and other intangible assets; deferred tax assets that rely on future profitability; defined benefit pension fund surpluses (where applicable); direct, indirect and synthetic holdings of own Common Equity Tier 1 instruments; material holdings in financial institutions; and several other prescribed items. Each of these requires identification from the firm’s balance sheet and application at the correct value — which may differ from the balance sheet carrying value in some cases.

The most frequent error is incomplete identification of intangible assets requiring deduction. Software developed internally, licences, customer lists and other intangibles that appear on the balance sheet must be deducted from CET1 under MIFIDPRU unless specifically exempted. Some firms deduct purchased goodwill and recognised intangibles but overlook internally generated software that has been capitalised. The Head of Regulatory Reporting needs to work with the finance team to identify all intangible asset balances — not only those separately presented on the face of the balance sheet.

K-COH calculation errors

The K-COH K-factor — client orders handled — applies a multiplier to the daily average value of client orders that the firm handles. The calculation requires a rolling average of client order values over the preceding six months, updated quarterly. The most common errors relate to the scope of what counts as a client order handled.

MIFIDPRU distinguishes between orders executed by the firm on behalf of clients (which count for K-COH) and orders executed by third parties at the firm’s direction (where the position is more nuanced). Firms that route client orders to affiliated execution venues or use direct market access arrangements where the legal execution occurs at another entity need to apply the definition carefully. Including orders that should be excluded, or excluding orders that should be included, directly affects the K-COH capital requirement.

Submission frequency and threshold breaches

MIFIDPRU sets different submission frequencies for Class 2 and Class 3 firms, and the frequency applies to the firm’s classification at the time of submission — not its classification when it first implemented MIFIDPRU. A Class 3 firm that crosses a Class 2 threshold during the year must reassess its submission obligations from the point of the threshold breach, not from the next annual review. Failure to increase submission frequency when a threshold is crossed is a reporting breach even if the underlying capital and liquidity positions are correctly maintained.

The same applies in reverse — a Class 2 firm whose activity falls consistently below all Class 2 thresholds for a sustained period may be eligible for reclassification to Class 3, reducing its reporting burden. The Head of Regulatory Reporting should monitor the firm’s threshold position at each quarter end and escalate threshold breaches or sustained sub-threshold positions to the CFO and compliance function for consideration.

Attestation failures

RegData requires each return to be attested by an individual with appropriate authority within the firm. The most common attestation error is submission by an individual who does not hold the required level of seniority or authorisation — typically a member of the regulatory reporting team who completes the return but does not have the authority to attest it on behalf of the firm.

The attestation should be made by the CFO, the Head of Regulatory Reporting in a sufficiently senior capacity, or another senior executive with specific delegated authority for this purpose. The firm’s RegData configuration should ensure that attestation access is restricted to individuals with the appropriate authority — a technical control that prevents attestation errors at the point of submission.

RegData technical errors

Beyond the substantive calculation errors, RegData submissions generate technical validation failures that prevent a return from completing if not resolved. The most common are: incorrect treatment of zero versus blank cells in returns where the FCA’s validation rules distinguish between a zero value (which should be reported as zero) and a nil return (where the cell should be left blank); formatting errors in date fields and entity identifiers; and submission of returns under the wrong reporting entity where a firm submits under a holding company rather than the regulated subsidiary.

The Head of Regulatory Reporting should ensure the firm maintains a submission log that records validation results and any errors generated at each submission — not only the final successful submission. This log provides the evidence of a systematic quality process that the FCA would expect to see if it reviewed the firm’s regulatory reporting arrangements.

FD Capital places Heads of Regulatory Reporting and regulatory finance professionals who bring direct MIFIDPRU submission experience in FCA-regulated investment firms. Where a firm has experienced RegData errors or is concerned about the adequacy of its MIFIDPRU methodology, the quality of the regulatory reporting resource is invariably the starting point for remediation.

Related Services

• Head of Regulatory Reporting Recruitment
• SMF2 CFO Recruitment
• Investment Firm CFO Recruitment
• Compliance Recruitment
• Recruitment for FCA Regulated Firms

Adrian Lawrence

Adrian Lawrence FCA is the founder of FD Capital and a Fellow of the Institute of Chartered Accountants in England and Wales (ICAEW). He holds a BSc from Queen Mary College, University of London, and has over 25 years of experience as a Chartered Accountant and finance leader working with private, PE-backed and owner-managed businesses across the UK. He founded FD Capital to connect growing businesses with the Finance Directors and CFOs they need to scale — and personally interviews candidates for senior finance appointments.