The Financial Conduct Authority has fined interdealer broker Sunrise Brokers £642,400 for “serious” financial crime control failings in relation to cum-ex trading.
Cum-ex trading involves the trading of shares on or just before the last cum-dividend date. If in a suitable jurisdiction this can then allow a party to claim a tax rebate on withholding tax, sometimes without entitlement.
The FCA said Sunrise had deficient systems and controls to identify and mitigate the risk of facilitating fraudulent trading and money laundering in relation to business introduced by the Solo Group, between 17 February 2015 and 4 November 2015.
It highlighted two instances during which the firm failed to identify or escalate any potential financial crime concerns or suspicions when it should have done.
The first was when Sunrise executed a trade on behalf of a broker client, introduced by the Solo Group, at nearly twice the prevailing market price of the stock. The second was when Sunrise accepted a payment from a UAE-based entity connected to the Solo Group in respect of outstanding debts owed to them by Solo clients.
Mark Steward, executive director of Enforcement and Market Oversight, said: “Sunrise should not have carried out these self-evidently suspicious trades without proper due diligence. Sunrise’s failings were significant and this outcome demonstrates we will not tolerate firms’ lax controls and that we will work with overseas agencies to ensure London is not viewed as a haven for poor controls and practices.”
