Abdulali Jiwaji, Alasdair Glass and Kitty Kirton discuss the FCA’s use of its MiFIR powers to fine Infinox Capital in Thomson Reuters Regulatory Intelligence

When a fine was levied on Infinox Capital Limited ("Infinox") in January by the Financial Conduct Authority (FCA), the story made headlines. For a relatively small trading platform like Infinox, the FCA’s fine of GBP 99,200 was significant. It resulted from the company’s failure to submit 46,053 transaction reports relating to single-stock contract for difference trades executed between 1 October 2022 and 31 March 2023. According to the FCA, that failure increased the risk of market abuse going undetected.

Although the FCA has previously fined a number of firms for transaction reporting failures, the fine against Infinox is the first time that the regulator has brought an enforcement action under the transaction reporting provisions of the UK Markets in Financial Instruments Regulation (MiFIR) since they became law in 2018. As a benchmark for future enforcement, the FCA action against Infinox draws a regulatory line in the sand and sends a warning to other firms.

So, given that there were reporting failures, how was the breach identified?

The FCA states that it needs to receive complete, accurate and timely transaction reports in order to monitor, detect and disrupt market abuse effectively. But for a six-month period up to 31 March 2023, Infinox failed to submit transaction reports to the FCA for single-stock contracts for difference (CFD) trades made through one of its corporate brokerage accounts. CFDs have been explicitly labelled as high risk products, particularly vulnerable to market abuse due to their speculative and leveraged nature as well as the nature of the underlying assets.

Despite identifying its failure to submit these transaction reports following a third party review in March 2023, Infinox did not proactively report the breach to the FCA. Instead, the FCA independently identified a discrepancy in the transaction data that Infinox had submitted and contacted Infinox. It was only then that Infinox submitted a formal breach notification to the FCA.

The breach highlighted various procedural weaknesses in Infinox’s transaction reporting systems. Even after being notified of the breaches following the third party review of its transaction reporting systems, it took Infinox a year to confirm the total number of transaction reports that it had failed to submit.

The GBP 99,200 fine would have been GBP 141,800, but because Infinox agreed to resolve the case at an early stage, it qualified for a 30% discount from the FCA on the full penalty. In setting the fine, the FCA took into account a number of factors, including that Infinox made little or no profits from the breaches, there was no or little loss or risk of loss to consumers, investors or other market users, and that this was an example of inadvertent rather than deliberate breach.  The FCA also factored in that CFDs are a high-risk product as to potential market abuse, that the breaches revealed weaknesses in systems and internal controls relating to MiFIR transaction reporting; and that the FCA relies on firms to submit these reports to support its market surveillance.

Over recent years, there has been no shortage of FCA enforcement actions. In 2024, for example, more than 30 individuals and financial organisations were fined a total of more than GBP 176m - an increase of 230% compared to previous years.

Why then has it taken seven years for the FCA to use its powers under MiFIR for transaction reporting failures by issuing a fine?

In part, this particular fine appears to be the result of an increased drive by the regulator to improve the data it receives from market participants. Steve Smart, joint executive director of enforcement and market oversight at the FCA, commented in relation to the Infinox fine: "As a data-led regulator it is vital that firms submit accurate and timely transaction reports, and promptly bring any failures to our attention. Infinox failed to do this, which meant market abuse could have flown under the radar and risked the integrity of the market."

In November 2024, the FCA published a discussion paper entitled 'Improving the UK transaction reporting regime', which aims to inform the FCA’s consultative position on the development of a new transaction reporting regime. Comments and feedback were requested by 14 February 2025.

Core objectives outlined in the paper include improving data quality and ensuring that requirements remain proportionate for firms to support the competitiveness of UK markets.

Further, in an industry wide communication to providers of CFDs on 13 December 2024, the FCA laid out its intended areas of supervisory focus in relation to CFDs. That strategy expressly included a focus on transaction reporting.

The FCA has therefore identified inadequate transaction reporting as one of the key ways in which market abuse could occur and go undetected and has made it a priority for enforcement action.

It has also become clear that the FCA is increasingly targeting brokerage firms like Infinox because of their role as gatekeepers to the market. In its report, Assessing and reducing the risk of Money Laundering Through the Markets (MLTM), which was published in January, the FCA reviewed the financial crime systems and controls at a representative sample of brokers across the market. The report notes: "Wholesale brokers play an important role in maintaining the effectiveness of UK wholesale markets. Their position in those markets, global trading, and the level of discretion they can have in bringing transactions together means they can have a significant impact on the integrity of markets. This also makes them vulnerable to exploitation for MLTM purposes."

Infinox, as a brokerage firm dealing in CFDs, has therefore found itself at the confluence of two of the FCA's focus areas for enforcement action.

Notably, when calculating the fine for Infinox, the FCA increased the penalty by a multiple of seven on the issue of deterrence. In doing so, it confirmed that the purpose was to send a clear message both to Infinox and to the wider market that fulfilling transaction reporting obligations is an essential part of operations, and that such fines cannot be seen merely as a cost of doing business.

What lessons can be learned from Infinox's saga?

One key takeaway is that appropriate resources should be allocated so that the right systems and controls are in place to ensure that transaction reporting is timely and comprehensive. The fear of adverse publicity generated by an FCA Final Notice, like the one issued to Infinox, will no doubt encourage other firms to review their own transaction reporting processes.

Should any breaches arise, they should be swiftly brought to the FCA’s attention particularly since penalties for transaction reporting failures can be substantial as we have seen, and a delay in reporting a breach to the FCA can itself be a factor leading to an increase in penalty, if not a further breach in its own right.

Given the FCA’s discussion paper referenced above, it is likely that we will see more developments in this critical area of regulatory oversight in the coming months.