FCAs first fine for transaction reporting is really all about failure to disclose

Whenever the FCA has introduced a new and complex reporting regime, they have generally given firms a bit of leeway, while they adapt to the new operational realities of complying. Transaction reporting under MiFIR is a particularly complex and onerous regime, and as such, the grace given to firms has been of a commensurate scale.

That is certainly not to say that the FCA has not been actively working in this space – they have been proactively identifying potential gaps in the data they receive, rigorously following up with firms who have reported errors and omissions (and there have been many!), and using other tools such as skilled person reviews to remediate issues.

On the face of it, Infinox Capital, the subject of the £99,200 fine published on 29th January, does not appear to have issues with transaction reporting which would put it significantly out of line with its peers. Indeed, having worked with many firms to remediate transaction reporting issues, we have certainly seen bigger gaps in reporting, and larger numbers of transactions affected by errors, in some cases.

However, the key to the fine seems to be the firm’s response to the issue – i.e. failing to make a timely report, and lacking transparency in the information they provided to the FCA. In short, transaction reporting errors are common, but not reporting them on a timely and accurate basis to the regulator is not.

As such, firms should take away the clear message that all three key aspects of a transaction reporting solution must work well:

• Well designed reporting mechanisms, which ensure a high degree of accuracy and completeness in initial reporting;

• Robust controls, to ensure that any errors and omissions are identified on a timely basis; and

• Appropriate governance, to ensure that remediation is applied effectively, and disclosures to the FCA are made on a timely basis.

Although this fine applies to transaction reporting, the overall message is equally applicable to any FCA reporting, as the FCA becomes more data-led, and expectations around timely disclosure remain high.

Please get in touch if you need assistance or have any questions in regards to your firm’s obligations in this area.