Clifford Chance
FCA issues first fine for transaction reporting failures under MiFIR
On the 29th January, the FCA announced in a press release that it had fined Infinox Capital Limited ("Infinox") £99,200 for failing to submit 46,053 transaction reports between 1 October 2022 and 31 March 2023, which risked market abuse going undetected.[1] This is the first fine that has been imposed for transaction reporting failures under the UK Markets in Financial Instruments Regulation (Regulation (EU) No 600/2014) ("MiFIR").[2]
The facts
Infinox started trading single-stock contracts for difference or "CFDs" (derivative instruments used to speculate the rise and fall in price of a wide range of assets) in October 2022. The FCA stated that it considers this line of the business to be particularly vulnerable to market abuse due to the speculative and leveraged nature of CFDs, as well as the nature of the underlying asset. Prior to October 2022, Infinox traded predominantly in index CFDs.
Under Article 26(1) of MiFIR, "investment firms which execute transactions in financial instruments shall report complete and accurate details of such transactions to the competent authority as quickly as possible, and no later than the close of the following working day". Infinox was therefore obliged to report the single-stock CFD transactions to the FCA and failed to do so for 46,053 transaction reports, committing a breach of MiFIR.
The FCA independently spotted a potential discrepancy in Infinox's submitted transaction data and contacted Infinox to query it in May 2023.
Prior to being contacted by the FCA, Infinox had identified its failure to submit transaction reports through a third-party review. However, Infinox did not proactively report the breach to the FCA. In its Final Notice, the FCA commented that it "expects that in the event of any breaches to transaction reporting requirements, it is notified in a timely manner and not only once prompted by the Authority".[3]
The FCA also stated:
"the Authority considers it important to send a clear message… to the market that fulfilling transaction reporting obligations is an essential part of operating, and sufficient resources should be expended to ensure that appropriate systems and controls are in place".[4]
Infinox engaged with the FCA throughout the investigation and by agreeing to resolve the case early on, qualified for a 30% discount. This reduced the penalty from £141,800 to £99,200.
Key takeaways
Whilst many firms have been fined for failing to submit transaction reports in the past, this marks the first fine of its kind since the requirements became law under MiFIR. The development demonstrates the costly consequences for firms if they do not vigilantly comply with the regulations. The FCA has also firmly established its expectation for firms to back-report. This is often a costly and difficult exercise, as shown by the fact that it took Infinox months to finish back-reporting the affected trades.
In its press release, the FCA emphasised that Infinox's breach caused a risk of market abuse going undetected, in turn threatening the integrity of the market. The FCA's proactive approach in identifying and addressing the transaction reporting failures underscores its commitment to maintaining market integrity and protecting investors.
Firms are reminded of the importance of conducting regular reviews of their transaction reporting processes and systems to ensure compliance with MiFIR. In particular, where firms adopt new lines of business it is essential relevant regulations are accounted for through clear frameworks that ensure the appropriate reporting is completed, and where any issues arise, triggers a prompt reaction enabling the firm to remedy or report the breach as appropriate.
With the UK and EU both currently reviewing their transaction reporting obligations, firms will need to ensure they are aware of upcoming changes and adapt their compliance systems as necessary. In November 2024, the FCA published a Discussion Paper titled 'Improving the UK transaction reporting regime', asking for comments by 14 February 2025. The paper establishes the objectives of improving data quality and ensuring requirements remain proportionate for firms. These goals align with the FCA's 2024/25 Business Plan, with the overarching aim being to strengthen the UK's position in global wholesale markets. ESMA similarly published a consultation paper on 3 October 2024 reviewing transaction data reporting, requesting comments by 17 January 2025. Data obtained from transaction reporting is clearly considered vital by both bodies to maintaining market integrity, and we can expect to see more developments on firms' reporting responsibilities over the next year.
----------------------------------------------------------------------------------------------------
1Financial Conduct Authority, 'FCA issues first fine for transaction reporting failures under MiFIR' (29th January 2025) <https://www.fca.org.uk/news/press-releases/fca-issues-first-fine-transaction-reporting-failures-under-mifir>.
2Although a number of firms have previously been fined under the Markets in Financial Instruments Directive 1.
3Financial Conduct Authority, 'Final Notice: Infinox Capital Limited' (27th January 2025) <https://www.fca.org.uk/publication/final-notices/infinox-2025.pdf>.
4Financial Conduct Authority, 'Final Notice: Infinox Capital Limited' (27th January 2025) <https://www.fca.org.uk/publication/final-notices/infinox-2025.pdf>.
