FCA told to stop cum-ex probe after judge questions regulator’s priorities
An investigation into a trader involved in cum-ex transactions has been stopped, after a judge questioned the FCA’s apparent lack of commitment to probing the European tax scandal.
City watchdog the Financial Conduct Authority (FCA) was ordered to pause its probe until 2022, after a separate court decides on a case brought by Danish tax authorities against former hedge fund manager Sanjay Shah, Bloomberg reported.
The investigations into the cum-ex scandal were not “one of the FCA’s high priorities”, a judge said.
The cum-ex scandal led to billions of euros in losses for the treasuries of countries such as Germany, Denmark, France and Italy, and has led to arrests, raids and court cases dragging in some of the financial world’s largest players.
The name comes from the Latin for with-without and refers to the stocks with and without their dividends.
Cum-ex trading involved using a now-closed legal loophole to claim tax credits for both buyers and sellers of shares by buying shares just before their dividends expired and then selling them on straight away.
Numerous banks and investors are being scrutinised for their role in it.
The FCA’s case into the accused trader, who cannot be named, has been open since at least 2015.
The FCA is looking at 14 firms and six individuals who operated dividend-stripping schemes in Denmark, Germany, France and Italy.
Denmark’s tax agency is suing Shah and his associates in London, in a bid to recoup £1.5bn pounds it says it was defrauded out of, Bloomberg reported.
The FCA said its permission to appeal was refused by the judge who heard the case. The regulator said it would now be seeking permission to appeal from the Court of Appeal.