FCA issues first fine for breach of MiFIR transaction reporting requirements

The Financial Conduct Authority (FCA) has fined Infinox Capital Limited £99,200 for failing to submit 46,053 transaction reports which increased the risk of market abuse going undetected. Although the FCA has fined a number of firms in the past for transaction reporting failures, this is the first enforcement action against a firm for a breach of the MiFIR requirements. 

The action is a timely reminder that firms need to be vigilant on transaction reporting and confirmation that the FCA will enforce MiFIR transaction reporting failures. 

With changes to both UK and EU MiFIR transaction reporting requirements just around the corner (as reviews of the rules are due to complete later this year in both markets), transaction reporting was already going to be a key focus area for 2025. This FCA fine will only increase firms’ focus on the topic.

What happened?

An FCA investigation found that between 1 October 2022 and 31 March 2023, Infinox failed to submit transaction reports to the FCA by close of the following working day, or at all, in relation to transactions by its single-stock contracts for difference (CFD) desk through one of its corporate brokerage accounts. This contravened Article 26(1) of UK MiFIR. 

In addition, whilst Infinox identified its failure to submit these transaction reports following a third-party review, it failed to proactively report the breach to the FCA until prompted by the FCA (who had independently identified the breach and approached the firm), highlighting significant weaknesses in Infinox’s transaction reporting systems and controls. Even then, it took the firm a year to confirm the total number of transaction reports it had failed to submit.

How did the FCA calculate its penalty? 

In calculating its penalty, as the firm had not benefited financially from the breach, the step 1 (disgorgement) figure was set at £0. 

When determining the seriousness of the breach at step 2, the FCA used the number of missing transaction reports as the basis for the calculation (rather than the firm’s revenue). In this case, it attributed a value of £2.00 for each of Infinox’s 46,053 missing transaction reports. The FCA assessed the seriousness of the breach at Level 3, reflecting the fact that the FCA considers single-stock CFDs to be a particularly high-risk product prone to potential market abuse. In addition, as approximately 60% of trades in Infinox’s business line were executed through this corporate brokerage account, the FCA considered the firm’s failure to transaction report to be a particularly serious breach. 

The FCA increased the penalty by 10% at step 3 (mitigating and aggravating factors) to reflect Infinox’s failure to quickly bring the breach to the FCA’s attention. The FCA had also given substantial guidance to the industry regarding transaction reporting requirements through, among other things, its webpage and Market Watch newsletter. There were also prior instances where Infinox had failed to submit transaction reports for other areas of its business.

The FCA increased the penalty by a multiplier of 7 at step 4 for deterrence, noting that it wanted to send a clear message to both Infinox and 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. The FCA also wanted to avoid the temptation of firms of seeing any fine imposed as a “cost of doing business” and simply “factored into operating.” 

Infinox benefited from a 30% discount for early settlement. 

What lessons should firms take away?

• Be vigilant on transaction reporting: The FCA expects firms to submit accurate and timely transaction reports. In particular, be aware of FCA commentary in this space (e.g. through Market Watch newsletters etc.) and check your transaction reporting systems and processes against any shortcomings previously highlighted by the FCA. It is clear from the FCA’s penalty calculation that it regards failure to comply with transaction reporting guidance / commentary will be viewed as an aggravating factor in the event of enforcement. 
   
• Scrutinise your systems and controls function: Infinox had limited resource allocated to transaction reporting systems and controls and failed to put in place any steps to scrutinise its process or put checks in place to ensure that correct trades had been identified as reportable. Failures only came to light following a third-party review.
   
• In the event of any breaches, bring them promptly to the FCA’s attention: The FCA expects to be notified quickly. If you identify a transaction reporting breach (through a third-party review or otherwise), do not unnecessarily delay notification, as any penalty is likely to be increased. 
   
• Penalties for transaction reporting failures could be substantial: The FCA’s use of a £2 baseline per transaction report and the large uplift to the penalty for deterrence only confirm that transaction reporting failures will be extremely costly for firms. 
   
• Be aware of upcoming changes to transaction reporting requirements: Both the UK and EU are currently reviewing their transaction reporting requirements, with changes expected to be finalised during 2025. Firms will need to commit time and resource to implement the resulting changes to ensure ongoing compliance in this key area of regulatory focus. 

The final notice is available here.

The FCA press release, published on 29 January 2025, is available here.

View our Wholesale Markets Review Timeline on our Knowledge Portal with links to our more detailed briefing notes on developments in this area.