In the last Series, we covered some of the basics of Cum-Ex trading – how the trade works, what factors can create a duplication of withholding tax reclaims and what a short seller is.
In the next few series we will be going over products alternative to shares that could be used in Cum-Ex. In Series 2 we look at ETFs.
A lot has happened since FMCR last published “Were ADRs used for Cum-Ex Trading” and “Cum-Ex trading – is your firm affected?” – two British traders have been found guilty of tax evasion, more participants have been indicted, new European jurisdictions have launched investigations and the FCA have started investigating the involvement of a number of UK institutions and individuals in Cum-Ex.
Since 2017, SEC has issued monetary settlements totalling over $432mm across 15 institutions for improper handling of “pre-release” American Depositary Receipts (ADRs) and it has yet to be revealed how many other institutions are still under investigation.
The SEC states in one related filing that:
“the structured transaction was priced by splitting up portions of the foreign tax that was not paid on the dividend.”
This sounds very much like the signature of a Cum-Ex transaction.
The SEC’s ongoing investigation into “pre-release” American Depositary Receipts (ADRs) has opened up another avenue into the complex world of Cum-Ex trading.
This revelation calls into question some of America’s top investment banks and brokers.
Pre-release ADRs potentially enable another variation of the Cum-Ex trades that have convulsed financial markets across Europe.
First charges are now being brought by Cologne prosecutors who have been leading criminal investigations into Cum-Ex.
Two London traders are facing criminal charges in court proceedings that began on 4th September in Germany’s elaborate tax case.[1]
The impact of the alleged tax trading scheme has been estimated at €55bn but could be over €80bn and is said to extend to Germany, Denmark, Austria, Belgium, France, Spain, Italy, the Netherlands, Finland, Norway and Switzerland.[2] The case is only just beginning and the list of parties involved continues to grow.
