2023-06-06 15:52:56
DThe British financial regulator FCA has imposed its highest ever fine in connection with cum-ex stock transactions. Because of serious omissions, the brokerage house ED&F Man Capital Markets (MCM) has to pay 17.2 million pounds, the equivalent of almost 20 million euros, the authority in London announced.
Between February 2012 and March 2015, MCM had carried out dividend arbitrage transactions on a substantial scale for its client, which resulted in an unlawful multiple refund of withholding tax by the Danish tax authorities. Overall, Denmark suffered a tax loss of two billion euros as a result of cum-ex trading.
According to the UK Financial Regulator’s 23-page ruling, MCM and a Dubai-based affiliate had claimed withholding tax despite not owning or lending shares, paying dividends or paying taxes. For this, the broker received more than 5 million pounds in fees. Despite an annual internal compliance review, no attempt was made to understand or terminate the trading strategy, the financial regulators allege.
Illegal trade
“It is totally unacceptable for licensed firms to make money from this type of trading,” said Therese Chambers, who is responsible for market surveillance and enforcement at the FCA. It is vital that all firms have the proper controls and expertise in place to prevent them from being used to facilitate financial crime.
MCM accepted the fine. The broker, which was taken over by the financial service provider Marex in August 2022, was waived a third of the penalty payment originally promised. It is the fourth fine by the FCA, which also emphasized in its announcement that it would continue to actively support foreign law enforcement agencies.
In autumn 2022, Danish investigators and prosecutors from Cologne searched the MCM site in London. In addition, Denmark’s tax authority MCM sued other companies and the British investment banker Sanjay Shah in a court in London for 1.4 billion pounds. However, the lawsuit against MCM was severed and dismissed.
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