Transaction Failings

City Index Ltd is the seventh firm to be fined by the FSA in the past 18 months or so for transaction reporting failures. The last transaction reporting case was against Societe Generale in August 2010 – see Regulatory Roundup 20 for further information.

Five of the six previous actions have resulted in fines in excess of £1m (Barclays holds the record so far with a fine of £2.45m); the City Index penalty was £490,000.

The firm was responsible for in excess of 2m reporting breaches (60% of reportable transactions), 97% of which was down to incorrect population of reporting fields with the balance of 55,000 breaches because of a failure to report.

Ironically, it was the submission of a Suspicious Transaction Report by City Index that first alerted the FSA to a discrepancy between a transaction reporting submission and information held by the FSA.

There were various reasons for the failings including the non-resubmission of rejections (poor staff training) and mixing up the ‘sells’ and ‘buys’ (new trading platform).

As is usual now, the Final Notice isn’t all rules based. Apart from SUP 17 reporting breaches, the FSA found the firm had breached Principle 2 (‘skill, care and diligence’) by failing to identify errors in the set-up of the new trading platform process relating to transaction reporting and Principle 3 (‘management and control’) in not having in place adequate transaction reporting processes and procedures to ensure that it was fully compliant with MiFID.

Firms that undertake transaction reporting may wish to review their own transaction reporting procedures in the light of the Final Notice. Portfolio managers do, of course, have the possibility of using the exemption in SUP 17.2.2G.Firms may find reference to the Transaction Reporting User Pack (TRUP) and Market Watch 35 of use – please see Regulatory Roundup 17.