The FCA has published a Final Notice imposing a fine of £99,200 on a CFD provider for failing to make transaction reports over a 6 month period.  We summarise below the key facts and potential impact for other firms who, in light of FCA expectations, may wish to consider proactively reviewing their own reporting and will need to take care in dealing with any issues identified.  

• Firm: Infinox Capital Limited, has been authorised by the FCA since 15 September 2009 as a CFD provider.
• Fine: £99,200 (the basis of the calculation included applying £2 for every missed report as well as uplifts for aggravating factors and deterrence).
• Settlement: Yes, a 30% discount was obtained.
• Provision Breached: Article 26(1) Markets in Financial Instruments Regulation (UK version) (MiFIR).
• Relevant Period: 1 October 2022 and 31 March 2023.
• Facts:
  • October 2022: ICL started trading single-stock CFDs (a line of business FCA considers to be particularly vulnerable to market abuse);
  • October 2022 to March 2023: ICL failed to submit 46,053 transaction reports to the FCA in relation to transactions undertaken by its single-stock CFD desk through one of its corporate brokerage accounts;
  • February 2023: ICL commissioned a third party review of its transaction reporting systems;
  • March 2023: ICL identified a failure to submit transaction reports but did not report this to the FCA;
  • May 2023: FCA contacted ICL to clarify a discrepancy identified in reports submitted by ICL and ICL confirmed its failure to report;
  • July 2023: ICL submitted a formal breach notification to the FCA;
  • December 2023: Back-reporting was completed. 
• Failings
  • Failing to submit transaction reports by close of the day following the transaction was a breach of Article 26(1) MiFIR.
  • The FCA also comments that:
    • It expects to be notified in a timely manner in the event of any breaches of the transaction reporting requirements (and not only when contacted by the FCA);
    • It was the responsibility of a single individual to manually identify which financial instruments were reportable when new business was commenced.  ICL did not put in place any steps to scrutinise this process or check to ensure the correct trades had been identified as reportable prior to commissioning the third party review. 
• Impact: All firms engaged in transaction reporting, and CFD providers in particular, should consider reviewing their transaction reporting and should have a clear strategy for conducting such reviews promptly in the event of any new lines of business and for reacting to any issues identified, including with regards to regulatory notifications, with a view to managing the potential impact as far as possible.  The FCA’s highlighting of the market abuse risk in relation to trading single-stock CFDs should also be heeded in the context of considering the appropriateness of the control framework. 

We regularly advise firms in relation to such matters and we also track regulatory decisions so please get in touch if a conversation would be of interest.