PRA penalties put real-time data controls in focus for market utilities

The Prudential Regulation Authority’s recent enforcement actions and multi-million-pound penalties over data misrepresentation have sharpened scrutiny of how financial market utilities govern operational data, according to Nitin Pahwa, director of RegTech strategy and AI governance at OSTTRA. Pahwa said the effect is to push regulatory reporting beyond a periodic administrative process and into the core systems that support resilience and trust.

In an external opinion published by Finextra, Pahwa argued that financial technology utilities and market infrastructure providers need to treat data transparency as part of daily operating control, rather than as a retrospective compliance exercise. The comments were framed around institutions that support high-stakes financial operations, including onboarding and due diligence for large banking clients.

Pahwa said the older model for client due diligence relied on large information packs assembled annually and exchanged manually across networks. In his assessment, that model can leave operational blind spots because it tests evidence at a point in time while financial infrastructure, cyber controls and reporting obligations continue to change.

He said a more resilient approach would place active information-security controls and live Statement of Applicability frameworks inside the due diligence process. In practice, that means using current control evidence as part of onboarding and audit activity, rather than relying mainly on static documentation prepared for a scheduled review.

Shift toward machine-readable compliance

Pahwa described the next stage as “compliance-as-code”, where regulatory and security controls are converted into machine-readable validation engines. Such systems can test whether required controls are present and operating against defined criteria, producing audit-ready evidence without waiting for a manual review cycle.

According to Pahwa, this approach can shorten assessment work that previously took months to a matter of hours. He also said automated validation can reduce reporting gaps that may draw closer regulatory examination.

The mechanism is material for market utilities because onboarding, clearing relationships and technology assurance often depend on a client’s ability to verify controls before approving a connection or service. If evidence is generated continuously, institutions can respond faster to due diligence requests while maintaining a clearer record of how controls were tested.

Pahwa linked the issue to tighter UK oversight of financial holding structures and cloud-based clearing architectures. He did not cite specific enforcement cases or identify individual firms, but said penalties tied to operational integrity and data transparency have sent a signal that governance failures can carry direct financial and supervisory consequences.

Finextra identified the post as external author content and said it was published without editing, reflecting the author’s views. Pahwa’s central argument was that market infrastructure firms that automate data governance may be better placed to maintain transaction flow while meeting rising supervisory expectations.

This story draws on original reporting from Finextra Research.