Market abuse and transaction reporting – two sides of the same coin

Sigma Broking Ltd has received a £1mil fine for transaction reporting failure, three years after it was fined for market abuse monitoring failure. The message from the regulator cannot be clearer – market abuse and transaction reporting are two sides of the same coin.

The FCA has issued a fine of £ 1 million to Sigma Broking Limited for failing to submit complete and accurate transaction reports during a five-year period from December 2018 to December 2023. This is the second fine the FCA has issued in the last eight months for transaction reporting failure, another reminder that the regulator is watching and will not hesitate to take action.

How are transaction reporting and market abuse connected?

It’s worth remembering that transaction reporting and market abuse go hand-in-hand, and issues identified in one area should prompt you to review the effectiveness of systems and controls in the other.

The FCA uses transaction reporting to detect and investigate market abuse. The data received from transaction reports is used by the regulator to conduct its own trade and order surveillance. Many enforcement cases have originated from this very surveillance.

This crystalised for Sigma Broking, as the regulator stated in its final notice:  

“In October 2022, the Authority fined Sigma £531,600 for failing to accurately report client allocations connected to other areas.... That ought to have prompted Sigma to ensure that it was complying with the requirements of Article 26 of MiFIR, and to submit complete and accurate transaction reports in a timely fashion.”

This expectation applies the other way too, and even more so where firms have had issues with transaction reporting. Inaccurate transaction reports may therefore prompt the FCA to ask for your market abuse risk assessment and controls.

So, what are the lessons learnt?

Given this is a transaction reporting fine and the second one this year, the number one takeaway is to ensure your transaction reporting framework is fit for purpose. A transaction reporting review must feature in your compliance monitoring plan among the top priorities.

Transaction reporting and market abuse frameworks should go hand-in-hand. While these two areas may be managed by different teams or business areas, firm’s Senior Management and Compliance should stay alert and connect the dots to ensure any potential weaknesses in these areas are identified and remediated before they come to the attention of the FCA.

How Ocorian can help

We regularly support firms reviewing and enhancing its compliance framework on transaction reporting and market abuse.

In the transaction reporting sphere, we can help you assessing the completeness and accuracy of your reports or carrying out a comprehensive health check to provide assurance on your entire reporting framework.

In the market abuse space, we can advise on selecting surveillance systems, calibrating alerts and designing case management processes as well as conduct a health check of your market abuse framework. We also carry out case reviews where suspicions of market abuse have arisen and offer a market abuse managed service in partnership with KRM 22.

For advice on the transaction reporting and / or market abuse regime or to find out about our services, get in touch