UK FCA fines Sunrise Brokers LLP £642,400 for cum-ex trading violations

Sunrise Brokers LLP has been fined over £600,000 for deficient anti money laundering systems and controls.

This is the second case brought by the FCA in relation to cum-ex trading, dividend arbitrage and withholding tax (WHT) reclaim schemes. The first FCA case relating to cum-ex trading concluded in May 2021.

The FCA found that 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.

On review it was found that the Solo trading throughout the period was characterised by a circular pattern of purported trades – characteristics which are highly suggestive of financial crime. The trading appears to have been carried out to allow the arranging of withholding tax reclaims in Denmark and Belgium.

In particular, in 2 instances the firm failed to identify or escalate any potential financial crime concerns or suspicions when it should have done, where:

  • 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.
  • Sunrise accepted a payment from a UAE-based entity connected to the Solo Group in respect of outstanding debts owed to them by clients of Solo.

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.’

More generally, the FCA found that Sunrise failed to exercise due skill, care and diligence in applying anti-money laundering policies and procedures and failed properly to assess, to monitor and to mitigate the risk of financial crime in relation to clients introduced by the Solo Group and the purported trading.

As Sunrise agreed to resolve all issues of fact and liability, it qualified for a 30% discount under the FCA’s executive settlement procedures.

The action taken is part of a range of measures taken in connection with cum-ex dividend arbitrage cases, and WHT schemes. This has involved proactive engagement with EU and global law enforcement authorities.

The FCA’s investigation into the involvement of UK based brokers in cum-ex dividend arbitrage schemes is continuing.

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