Leading City institutions have raised concerns about the security of data that will have to be transferred online and electronically under new reporting guidelines from the Financial Services Authority (FSA).
As part of an overhaul of its reporting system for regulated firms, the FSA is introducing Mandatory Electronic Reporting (MER) over a three-year period through to 1 April 2007. Mortgage and insurance companies will be the first to bite the bullet from April next year.
Firms will be able to either log on to the FSA's secure Web site and complete the reporting forms online, or connect its systems directly to the FSA over a secure Internet link using the extensible business reporting language (XBRL) standard.
But a consultation document published by the FSA reveals financial services organisations are concerned over a number of issues, including security and cost.
"A clear concern raised by many respondents was that of security of the information to be submitted," the report said.
The FSA said security is a key issue in MER and that the main objectives will be authenticating the firm to the FSA; authenticating the FSA to the firm; a valid audit trail ensuring the data the FSA acts on is that which the firm sent; and a secure communication channel so that data in transfer cannot be read or altered by a third party.
MER will now also be phased in after concerns were raised about a 'big bang' implementation. The FSA said it has learnt its lessons over a problematic previous move towards electronic reporting and will ensure the systems can cope with peak demand and are user-friendly. The FSA said the benefits to the industry overall will outweigh any costs associated with introducing new systems.
A test facility replicating the live web forms will be available for companies to use in the last quarter of 2004 and a number of advisory boards with end user organisations and software industry representatives have been established to ensure the smooth adoption of the new system.
Chris Wood, chairman of tech industry trade body Intellect's financial services group, which is represented on the FSA's Software Suppliers Advisory Panel (SSAP), said in a statement: "This is the beginning of the process and it is critical that work needs to be ongoing to ensure that the industry and FSA develop a comprehensive understanding of the… requirements and the technological solution."