Quick Facts
Overview
The Financial Conduct Authority (FCA) imposed a £1,087,300 financial penalty on Sigma Broking Limited for failing to submit complete and accurate transaction reports for nearly all its transactions in financial instruments between 1 December 2018 and 1 December 2023.
This contravened Article 26 of MiFIR, which requires firms to report transaction details to enable market surveillance, and breached Principle 3 of the FCA's Principles for Businesses due to inadequate systems and controls. The failures stemmed from incorrect setup during MiFID II implementation, impacting the FCA's ability to detect market abuse and financial crime.
Details of the Case
Sigma Broking Limited, a UK MiFID investment firm authorized by the FCA since 5 August 2008, provides brokerage services including access to worldwide exchanges. As a requirement under Article 26 of MiFIR (the UK version of the EU regulation on markets in financial instruments, onshored post-Brexit), Sigma must report all reportable transactions in financial instruments to the FCA. These reports must include details such as buyer and seller information and client allocations to support effective market oversight.
The issues were identified after the FCA contacted Sigma on 17 May 2023 regarding discrepancies in buyer and seller reporting. Sigma confirmed problems on 20 June 2023 and initiated a review with a third party. By 15 January 2024, Sigma notified the FCA of potential failures in approximately 984,000 reports, later quantified as 254,384 errors and omissions by 5 February 2025. The failures included reversing buyer and seller information and underreporting client allocations, resulting from weaknesses in reporting logic established during MiFID II implementation in January 2018.
Sigma had prior awareness of transaction reporting requirements and was fined £531,600 by the FCA in October 2022 for similar client allocation issues in other business areas. . An independent third-party review began in March 2023, prompted by Sigma's approval as a Category 1 Member of the London Metal Exchange in January 2022, which identified accuracy and completeness issues by August 2023. Remediation, including back reporting (correcting and resubmitting erroneous reports under Article 26(7) of MiFIR), was completed by February 2025.
These shortcomings materially hindered the FCA's surveillance efforts, as incomplete data provided an inaccurate view of client trading activity, complicating detection of market abuse and financial crime.
Timeline of Events
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March 2023: Sigma initiates an independent third-party review to assess reporting completeness and accuracy, following its admission as an approved Category 1 Member of the London Metal Exchange in January 2022.
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May 2023: FCA’s Markets Reporting Team alerts Sigma to discrepancies (reversed buyer/seller fields).
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June 2023: Sigma confirms data issues, engages further, and commits to monthly remediation updates.
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December 2023: As part of remediation, Sigma implements immediate system fixes to enable accurate reporting.
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January 2024: Sigma notifies FCA of ~984,000 potentially incorrect reports.
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February 2025: Sigma confirms 924,584 erroneous reports and submits corrected back-reports.
Worked Examples
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Reversed Buyer/Seller Information: In transaction reports, Sigma incorrectly swapped buyer and seller details, leading to inaccurate representations of trades and potentially obscuring true market participants.
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Underreported Client Allocations: Reports omitted or incorrectly detailed how trades were allocated to clients, preventing the FCA from tracking individual client activity across transactions.
History of Reporting Failings
In October 2022, the FCA fined Sigma £531,600 for failing to accurately report client allocations between 1 December 2014 and 12 August 2016. This prior enforcement should have prompted Sigma to bolster its reporting controls and ensure compliance with Article 26 of MiFIR, yet similar deficiencies persisted.
Fines and Penalties
Final Penalty:
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Original Penalty (pre-discount): £1,553,300
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Settlement Discount: 30 % under the FCA’s Executive Settlement Procedures
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Total Financial Penalty: £1,087,300
Key Quotes
- "The Authority is a data led regulator. Transaction reporting data sets are an important information source that enable the Authority to conduct effective surveillance and oversight, meet its statutory objective to maintain market integrity, and deliver on prioritised commitments in the Strategy." (From the FCA Final Notice, emphasizing the role of accurate reporting.)
- "Without this information, the Authority is provided with an incomplete picture of each individual client's trading activity. Therefore, failure to report this information materially impacts the Authority's ability to carry out effective surveillance and oversight, to detect, investigate, and prevent market abuse and reduce financial crime." (From the FCA Final Notice, highlighting the consequences of reporting failures.)
- "During the Relevant Period, Sigma's failure to submit complete or accurate transaction reports, across all of its trading desks, was a result of serious and systemic weaknesses in Sigma's transaction reporting controls which had to be remediated." (From the FCA Final Notice, describing the nature of the breaches.)
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