This week the FCA, the UK financial market regulator, published (click here) an enforcement announcement against Sigma Broking Limited for MiFID/MiFIR transaction reporting failures. The failures occurred between 01 December 2018 and 01 December 2023 and involved hundreds of thousands of transactions caused by an incorrect system setup. As a regulated broker, Sigma is active in commodity markets and is a Category 1 Member of the London Metal Exchange (LME). The announcement notes that this is the second enforcement action against Sigma for inadequate transaction reporting – in October 2022, the FCA fined Sigma GBP 531,600 for failing to report on 56,000 transactions and for missing 97 suspicious trades between December 2014 and August 2016 (click here for the Final Notice). Two Directors were banned as a result of the 2022 action.
Salient facts from the FCA’s 13-page Final Notice (click here) in relation to the more recent case are summarised below:
- Sigma has been FCA-authorised as a brokerage firm since 05 August 2008 and became an approved Category 1 Member of the LME in January 2022. Sigma is also a UK MiFID investment firm;
- As a UK MiFID firm, Sigma is required under Article 26 of MiFIR to submit transaction reports to the FCA for all reportable transactions in financial instruments;
- Sigma was subject to transaction reporting requirements under MiFID II and MiFIR since January 2018;
- On 17 May 2023, the FCA’s Markets Reporting Team contacted Sigma about a discrepancy it had identified in the reporting of buyer and seller information;
- After receiving no reply, the FCA chased Sigma for a response on 13 June 2023 - on 20 June 2023, Sigma responded confirming that it had reviewed the data and had identified issues with the content of several fields, and had initiated a broader review with the assistance of a third party;
- From July 2023 to December 2023, Sigma worked with the FCA to provide monthly updates regarding the identification and remediation of transaction reporting matters;
- On 15 January 2024, Sigma notified the FCA that it may have failed to submit 984,000 complete and accurate transaction reports;
- The errors included inaccurate reporting through the reversal of buyer and seller information and the under-reporting of client allocation;
- It then took Sigma a further year ending on 05 February 2025, to finalise the back-reporting of the affected trades and to accurately quantify the number of errors and omissions;
- In March, Sigma had initiated an independent third-party review of the completeness and accuracy of its transaction reports – seemingly spurred by becoming an LME member but notably before the FCA’s first contact with Sigma regarding the case which occurred in May that year;
- In August 2023, the third-party review identified accuracy and completeness issues in Sigma’s transaction reporting processes, which resulted from an incorrect system setup as well as unspecified weaknesses in the reporting logic during MiFID II implementation;
- As part of a remediation project in December 2023 to resolve the firm’s transaction reporting processes, Sigma undertook an exercise to implement immediate fixes to enable it to report accurately.
Statutory and Regulatory Provisions Breached
Annex A (see page 12) stipulates the various provisions breached by Sigma according to the FCA, as summarised below:
- MiFIR - The requirement to submit transaction reports is contained in Article 26 of MiFIR;
- Principles for Businesses - Principle 3 provides that a firm must take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems;
- Public Statements – The FCA has given substantial and ongoing guidance to the industry regarding transaction reporting requirements through its transaction reporting webpage, the Market Watch newsletter, the Transaction Reporting User Pack (under MiFID), the ESMA Transaction Reporting Guidelines and Q&A, the Transaction Reporting Forum, and ad hoc industry events.
- Sigma was fined GBP 1,087,300 for its failings – Final Notice provides their five-step breakdown in reaching the final monetary penalty.
The FCA considered the following to be aggravating factors:
- The FCA had provided substantial guidance to the industry regarding transaction reporting requirements through its webpage, the Market Watch newsletter, the Transaction Reporting User Pack (under MiFID), the ESMA Transaction Reporting Guidelines and Q&A, the Transaction Reporting Forum and ad hoc industry events;
- Sigma was fined previously GBP 531,600 in October 2022 for similar failings to accurately report client allocations connected to other areas of its business;
- The firm was effectively reminded, during the period subject to this case of the need to submit complete and accurate transaction reports and regularly reconcile records;
- Sigma failed to quickly, effectively and completely bring the breaches to the FCA’s attention;
- The FCA does not credit Sigma with the independent third-party review in March 2023 as this was evidently triggered by becoming a Category 1 Member of the LME rather than being in direct response to its own failings;
- Sigma did not inform the FCA of the existence, and on-going nature, of the third-party engagement until 20 June 2023 and then only after it had been contacted by the FCA in May 2023;
- During the period in question the FCA published two other enforcement actions against other firms for transaction reporting failures.
The Final Notice notes that the aggravating factors increased their penalty reckoning by 40%.