On 18 February 2025, the United Kingdom Financial Conduct Authority (UK FCA) issued a Final Notice: Mako Financial Markets Partnership LLP, imposing a fine of £1,662,700 for failing to ensure it had effective systems and controls to guard against financial crime. The UK FCA alleges that Mako also failed to adequately apply the policies and procedures it had in place, leaving it vulnerable to misuse in relation to cum-ex trading.
The UK FCA’s decision concludes its investigations into cum-ex trading, marking the eighth and final enforcement case related to this practice. Working with EU and global law enforcement agencies, the UK FCA has imposed fines exceeding £30 million in connection with cum-ex trading cases. Between December 2013 and November 2015, Mako executed purported over-the-counter (OTC) equity trades worth approximately £68.6 billion in Danish equities and £23.6 billion in Belgian equities on behalf of clients linked to the Solo Group, receiving £1.45 million in commission. According to the UK FCA, these transactions were circular in nature, raising highly suggestive concerns of financial crime. The trading allegedly aimed to facilitate withholding tax (WHT) reclaims in Denmark and Belgium, where several individuals have since been convicted in connection with the scheme.
UK FCA found that Mako failed to identify red flags linked to transactions involving the Solo Group. These included a series of trades with no clear economic rationale, which led to the Solo Group’s controller incurring a €2 million loss to the benefit of his associates. Furthermore, Mako accepted payments from a UAE-based third party linked to the Solo Group for outstanding debts without performing due diligence, exposing the firm to increased money laundering risks.
As Mako agreed to settle and did not dispute the UK FCA’s findings, it qualified for a 30% discount on the fine under the UK FCA’s settlement discount scheme.
Background and Regulatory Violations
Cum-ex trading involves the trading of shares around dividend dates in jurisdictions where tax rebates can be claimed without actual entitlement. It falls under the broader category of dividend arbitrage trading, which seeks to place shares in alternative tax jurisdictions to minimise withholding tax liabilities or generate WHT reclaims.
This enforcement action is in continuation of the UK FCA’s series of cum-ex trading cases, which included previous fines against firms such as Sapien Capital Ltd, Sunrise Brokers LLP, TJM Partnership Ltd (in liquidation), ED&F Man Capital Markets Ltd, Bastion Capital London Ltd, Arian Financial LLP, and the ongoing case against Nailesh Teraiya.
The UK FCA’s joint executive director of enforcement and market oversight, Therese Chambers, stated: “Mako failed to spot clear red flags and facilitated highly suspicious trading that made it vulnerable to being used to support financial crime.” She further added: “For UK financial services to grow and compete, investors need to have trust in it. That’s why it is vital we stamp out these unacceptable practices which risk the reputation and integrity of UK markets.”
(Source: https://www.fca.org.uk/news/press-releases/fca-fines-mako-failings-cum-ex-trading)
