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What has happened?

On 29th January 2025 the FCA issued a fine of £99,200 to Infinox Capital Limited for failing to transaction report 46,053 CFDs executed, leading to the risk of market abuse going undetected.

What are the key points?

• The use of the word ‘first’ may be significant. Historically transaction reporting fines have tended to be a bit like busses. None appear for ages and then several arrive in quick succession. The last flurry was in 2018, for failures under MIFID, with significant 8 figure fines being issued. This should act as a warning to firms who have either identified but not yet notified the FCA of transaction reporting failures or those who have not been carrying out reconciliations and/or data checks to ensure that reporting is carried out to the required standard.
  
  
• The fine was issued for failure to report between 1st October 2022 and 31st March 2023. This is relatively recent, bearing in mind that the current reporting requirements have been in place since 3rd January 2018. In our experience, similar scenarios have happened elsewhere, so this fine may demonstrate the FCA is hardening its stance on transaction reporting failures.
  
  
• The fine was £2 per line. From a firm perspective, this is a positive, and has not increased in line with inflation since the last transaction reporting fines in 2018. However, firms should be aware that transaction reporting is a bulk reporting exercise, and a fine of £2 per line can easily equate to a multi-million pound fine dependant on the volume of transactions it is applied to.
  
  
• The issue was identified by the firm via a third party audit in March 2023, but not promptly reported to the FCA. Instead, the FCA identified the issue in May 2023 and approached the firm. The FCA appear to have given the firm little and/or no credit for having controls in place to identify the issue, instead being critical of a lack of oversight on a single person who was responsible for the identification of reportable instruments, with the absence of prompt notification to the FCA appearing to be the overriding consideration. It should be noted here that the firm took three and a half months to notify the FCA of the transaction reporting failings, by the submission of an errors and omissions notification report. Firms should therefore ensure that they have controls and reporting process in place to meet the regulator’s expectations.
  
  
• The failure was in respect of high-risk products, single stock CFDs, which could have influenced the FCA decision to fine the firm, even though the volume of missed reports was relatively small, with the FCA particularly singling these out as being vulnerable to market abuse.
  
  
• There appear to be some anomalies in the FCA decision. It is stated that it took the firm one year to confirm the back reporting. However, the narrative in the decision notice states that back reporting was completed on 15 December 2023, a little over 7 months following the FCA’s initial contact with them on 5 May 2023. We would urge firms that are subject to enforcement action to take independent third-party advice to ensure that they are subject to an accurate and fair assessment of any shortcomings highlighted by the regulator. 

Is this a unique scenario?

In our experience, this is not a unique scenario. Even though it is over seven years since the implementation of MIFIR, we still see firms who have either failed to report or failed to report in an accurate manner. In its decision notice, the FCA mentions previous transaction reporting failings by the firm and others.

The FCA referred to the issue being identified by the FCA rather than the firm. The regulator’s own data shows that there are many executing firms who still do not download MDP data, and even where they do, it would not necessarily be at a frequency that would have highlighted the failure to report in the prompt manner suggested by the decision notice. This could mean that there are potentially other firms with similar issues and that more fines may be forthcoming.

So why now?

Although the regulations have been in place for over seven years, the FCA still receives a significant volume of errors and omission reports, perhaps indicating that firms do not view transaction reporting failures as representing a significant regulatory risk. The decision notice refers to previous transaction reporting failings by the firm and refers to other brokerages as demonstrating similar failings.

Current trends

In addition to engaging with firms that execute transactions, we have seen the FCA increasingly engage with firms who are transmitting but do not execute. Such firms should be aware of their obligations and in particular the divisions of responsibility between themselves and executing firms, including the requirement to provide error and omission reports in a prompt manner if appropriate.

How can we help you?

Thistle Initiatives can support you in

• Auditing your transaction reporting by carrying out data interrogation and submission reconciliations
• Helping you develop a governance and reporting framework for transaction reporting
• Helping you to define your process flows, and reportable instruments/transaction reporting