The Financial Conduct Authority has fined The TJM Partnership Limited £2,038,700 in its third case relating to cum-ex trading, making it the largest fine so far.
In a notice last week (July 15), the regulator said the investment manager “fail[ed]” to ensure it had effective systems and controls to identify and reduce the risk of financial crime and money laundering in its business.
The company, which is now in liquidation, has stopped taking on new business. It is authorised to advise on and manage investments, as well as trade, by the FCA.
Its multi-million pound fine is in relation to trading it did on behalf of clients of the Solo Group between January 2014 and November 2015.
The trading, the FCA said, appeared to have been carried out to allow the arranging of withholding tax reclaims in Denmark and Belgium.
TJM executed trading to the value of approximately £59bn in Danish equities and £20bn in Belgian equities, receiving commission of £1.4mn which the FCA said was a “significant proportion” of the firm’s revenue in the period.
The City watchdog said the firm also failed to identify or escalate any potential financial crime concerns and money laundering risks in two other instances related to Solo Group business.
This, it said, involved transactions with “no apparent economic purpose” except to transfer substantial windfall profits of €4.3mn (£3.6mn) amongst its clients. The FCA said TJM also accepted payment from a third party without appropriate due diligence.
Following the case, TJM has agreed to resolve all issues of fact and liability.
On the fine, the FCA said in its final notice: “The Authority [FCA] considers that the revenue generated by TJM is indicative of the harm or potential harm caused by its breach.
“The Authority has therefore determined a figure based on a percentage of TJM’s relevant revenue during the period of the breach.”
Cum-ex scandal
The cum ex scandal was uncovered in Europe by a group of journalists in 2017.
Cum ex trading involved trading of shares on or just before the last dividend date, which would create confusion over who owned the shares when the dividend was paid and effectively allowed both parties to claim rebates on withholding tax.
The scandal involved a network of banks, stock traders, and lawyers and is estimated to have cost European treasuries €150bn (£128bn).
In November 2021, Sunrise Brokers was fined £642,000 for having deficient anti money laundering systems and controls.
This was the second case brought by the FCA in relation to cum ex trading.
Sunrise Brokers' fine was in relation to business introduced by the Solo Group between February 17, 2015 and November 4, 2015.
The FCA found the firm’s trading during the period showed a pattern of purported trades which the regulator said was highly suggestive of financial crime.
In May 2021, the FCA fined its first firm in relation to cum-ex trading, Sapien Capital, £178,000. The fine was, the regulator said at the time, reduced due to serious financial hardship.
Sapien’s failings spun February 10, 2015 to November 10, 2015, and were also in relation to business introduced by the Solo Group.
ruby.hinchliffe@ft.com
