FCA's largest cum-ex trading fine for reliance on elusive legal 'opinions'

Dependence on legal and tax opinions that were unseen and unreferred to by relevant staff, has contributed to ED&F Man's record penalty for generating fees from clients' tax fraud. In addition to taking one senior manager's word for the legitimacy of the trading strategy, the Compliance staff lacked the required expertise to oversee the business, reports Denis O'Connor.

Denis O'Connoris a fellow of both the Institute of Chartered Accountants in England & Wales and the Chartered Institute of Securities and Investment. He was a member of the British Bankers' Association Money Laundering Committee from 2003-10 and a member of the Joint Money Laundering Steering Group's board and editorial panel between 2010 and 2016. He has been a frequent speaker at industry conferences on financial crime issues, both in the United Kingdom and abroad.

The Financial Conduct Authority has fined ED&F Man Capital Markets Ltd (MCM) £17.2 million for serious compliance and governance failings in its oversight of dividend arbitrage trading. [1] MCM breached FCA Principle 2 (conducting business with due skill, care and diligence) and Principle 3 (taking reasonable care to organise its affairs responsibly and effectively, with adequate risk management systems). These failings allowed MCM to generate fees from trading strategies designed to enable its clients to reclaim tax illegitimately on dividends from the Danish authorities.