The FCA has fined Infinox Capital Limited £99,200 ($123, 000) for failing to submit over 46,000 transaction reports, marking the first enforcement action under the UK Markets in Financial Instruments Regulation (MiFIR) for such violations.
Between October 2022 and March 2023, Infinox failed to report transactions to the FCA for single-stock contracts for difference (CFDs) executed through a corporate brokerage account, by the close of the following working day. This violated Article 26(1) of UK MiFIR.
These reports are crucial for the FCA to monitor and detect potential market abuse.
While Infinox identified the reporting failures through a third-party review, they failed to proactively notify the FCA. The breach was only discovered by the FCA independently, highlighting significant weaknesses in Infinox’s systems and controls for transaction reporting, particularly for high-risk products like CFDs. It then took Infinox a year to confirm the total number of missing reports.
Market abuse
“As a data-led regulator, it is vital that firms submit accurate and timely transaction reports, and promptly bring any failures to our attention,” said Steve Smart, Joint Executive Director of Enforcement and Market Oversight at the FCA. “Infinox failed to do this, which meant market abuse could have flown under the radar and risked the integrity of the market.”
We asked Tom Callaby, a financial services partner with law firm CMS, why the FCA took regulatory action in this case.
“Transaction reporting errors often do arise, as in this case when new lines of business are introduced without appropriate change management,” said Callaby. “But this is the first time since the new regulation was introduced in 2018 that a fine for a breach has been imposed. In this case, the FCA identified various aggravating factors, including previous reporting issues and a failure to bring the breach to the FCA’s attention.
“The FCA also said that it considered it important to send a clear message to the market; this will be an important reminder for firms to move quickly when issues occur.”
GRIP comment
This fine serves as a reminder to firms of their obligations under MiFIR and the potential consequences of non-compliance. With MiFIR transaction reporting requirements under review in both the UK and EU, and changes expected in 2025, this area is already a key focus.
Key takeaways for firms:
- Prioritize transaction reporting: The FCA expects accurate and timely reporting. Pay close attention to FCA guidance and commentary eg Market Watch, and review your systems and processes.
- Strengthen systems and controls: Infinox’s limited resources allocated to transaction reporting systems and controls, and lack of internal scrutiny, were major contributing factors. Invest in robust systems and regular reviews.
- Promptly report breaches: Notify the FCA immediately of any identified breaches. Delaying notification will likely increase any penalty.
- Prepare for upcoming changes: Be aware of the impending changes to UK and EU transaction reporting requirements in 2025 and allocate resources for implementation.
