The Financial Conduct Authority (FCA) has hit ED&F Man Capital Markets with a fine of
£17.2 million for enabling its clients to gain £20 million in illegal tax
reclaims through cum-ex or dividend arbitrage trading. The UK financial regulator disclosed the fine on
Monday, noting that the trading and investment services firm made about £5.06
million in fees from the tax fraud.
Cum-ex
trading is a type of financial fraud in which loopholes in dividend tax laws in several
countries are exploited. Dividend
arbitrage trading happens when a trader buys and sells shares just before and
after a dividend is declared. This way, they are able
to claim multiple tax refunds from countries with
double taxation agreements.
According
to FCA, between February 2012 and March 2015, ED& F Man as a result of its
‘serious failings’ enabled its clients to illegally claim withholding tax (WHT)
from the Danish tax authority. The regulator alleged that the
firm failed to ensure that the clients owned the shares, either directly or
indirectly. It also blamed the fraud on ED&F Man’s ‘inadequate compliance checks’.
Furthermore,
FCA alleged that a
Dubai-based subsidiary of ED&F Man participated in the trading strategy. It
added that the
trading firm did not deny its findings and has agreed to settle the case.
“These
reclaims were illegitimate because under this strategy, WHT was reclaimed despite no shares being
owned or borrowed, no dividend being received, and no tax being paid,” FCA explained in a
statement.
Biggest
Penalty in Cum-Ex Trading Case
Meanwhile, the British
watchdog said the case
against ED&F Man is its fourth investigation into dividend
arbitrage trading fraud. The penalty against the company is also the FCA’s largest fine so far in such a case.
In July
last year, the financial markets supervisor slammed a £2 million
penalty on
financial services firm TJM Partnership for lapses related to cum-ex trading.
It also previously fined Sunrise Brokers and Sapien Capital for similar failures in 2021.
“It is
completely unacceptable for authorized firms to make money from this kind of
trading,” said Therese Chambers, FCA’s Joint Executive Director of Enforcement
and Market Oversight. “It’s essential that all firms have the right controls
and expertise in place to avoid the risk of being used to facilitate financial
crime.”
Brokeree, Advance Markets partner; illegal brokers; read today’s news nuggets.
The Financial Conduct Authority (FCA) has hit ED&F Man Capital Markets with a fine of
£17.2 million for enabling its clients to gain £20 million in illegal tax
reclaims through cum-ex or dividend arbitrage trading. The UK financial regulator disclosed the fine on
Monday, noting that the trading and investment services firm made about £5.06
million in fees from the tax fraud.
Cum-ex
trading is a type of financial fraud in which loopholes in dividend tax laws in several
countries are exploited. Dividend
arbitrage trading happens when a trader buys and sells shares just before and
after a dividend is declared. This way, they are able
to claim multiple tax refunds from countries with
double taxation agreements.
According
to FCA, between February 2012 and March 2015, ED& F Man as a result of its
‘serious failings’ enabled its clients to illegally claim withholding tax (WHT)
from the Danish tax authority. The regulator alleged that the
firm failed to ensure that the clients owned the shares, either directly or
indirectly. It also blamed the fraud on ED&F Man’s ‘inadequate compliance checks’.
Furthermore,
FCA alleged that a
Dubai-based subsidiary of ED&F Man participated in the trading strategy. It
added that the
trading firm did not deny its findings and has agreed to settle the case.
“These
reclaims were illegitimate because under this strategy, WHT was reclaimed despite no shares being
owned or borrowed, no dividend being received, and no tax being paid,” FCA explained in a
statement.
Biggest
Penalty in Cum-Ex Trading Case
Meanwhile, the British
watchdog said the case
against ED&F Man is its fourth investigation into dividend
arbitrage trading fraud. The penalty against the company is also the FCA’s largest fine so far in such a case.
In July
last year, the financial markets supervisor slammed a £2 million
penalty on
financial services firm TJM Partnership for lapses related to cum-ex trading.
It also previously fined Sunrise Brokers and Sapien Capital for similar failures in 2021.
“It is
completely unacceptable for authorized firms to make money from this kind of
trading,” said Therese Chambers, FCA’s Joint Executive Director of Enforcement
and Market Oversight. “It’s essential that all firms have the right controls
and expertise in place to avoid the risk of being used to facilitate financial
crime.”
Brokeree, Advance Markets partner; illegal brokers; read today’s news nuggets.
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- Source: https://www.financemagnates.com//forex/fca-fines-edf-man-17m-for-clients-dividend-arbitrage-trading/
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