‘Cum-ex trading’ refers to a system of share-dealing intended to enable reclaims of capital gains tax ostensibly withheld at source on dividends paid by listed companies (‘withholding tax’) and carried out in various European tax jurisdictions in the late 2000s and early 2010s.

The system first rose to prominence in 2017 following an expose by a group of investigative journalists. However, it was not until July 2021 that the German Federal Court, following a handful of prosecutions including two British traders (Martin Shields and Nicholas Diable), confirmed that the practice amounted to criminal tax evasion.

Since the practice came to mainstream attention, there has been a steady stream of criminal and civil actions, alongside regulatory investigations, of individuals and financial institutions across Europe allegedly complicit in the conduct or facilitation of cum-ex transactions.
For those suspected of facilitation, the issues under investigation are likely to be the extent to which there was knowledge of an underlying cum-ex transaction and whether there was a breach of integrity requirements.

In the UK, the Financial Conduct Authority conducted a review of dividend arbitrage trading in 2017. With this in mind, and given the scale of the alleged misconduct and the size of the alleged losses in Germany and elsewhere, enforcement action in the UK is likely.
Furthermore, as of 2022, authorities in Germany, Denmark and Belgian have all made successful requests for suspects in cum-ex prosecutions to be extradited from the UK.

Corker Binning is advising regulated persons arising from cum-ex trading in various European countries. The issues that have arisen hitherto concern the extent to which the national authorities condoned cum-ex, whether anyone was misled and what management at the various institutions advised their employees to do concerning cum-ex related business.

If you would like to discuss an investigation concerning cum-ex trading, please contact David Corker (dc@corkerbinning.com / 0207 353 6000) or Nick Barnard (nb@corkerbinning.com / 0207 353 6000).