The Financial Conduct Authority has slapped a so-called cum-ex trader with a £5.95m fine and banned him from working in financial services today for his role orchestrating a “sham” trading scheme.
In a statement this morning, the regulator said it had decided to fine and ban Nailesh Teraiya for a “fake” tax scheme run through his firm Indigo Global Partners limited, in which the company obtained “repayment” of €91.2m from the Danish tax authority, SKAT.
Teraiya received more than £5.1m through third parties and £326,000 from Indigo through the scheme which involved using “false and misleading documents” to obtain rebates from SKAT, according to the FCA.
Indigo claimed its clients held shares in companies and that tax had been withheld on dividends on behalf of the Danish tax authorities. The FCA found that Teraiya knew that the documents were false and misleading and that they were used to support “reclaims” of tax which had never actually been paid.
“As Chief Executive of Indigo and an experienced industry professional, Mr Teraiya knew that these were fake trades, supported by fake documents,” the FCA’s enforcement chief Therese Chambers, said. “He acted dishonestly and personally benefited to the tune of more than £5m for his part in this scheme. There is no place for such conduct in UK markets.”
The scale of the fine is designed to “deprive Mr Teraiya of the financial benefit he has received from his involvement in this scheme”, the FCA said, adding that the scheme was a “sham”.
Teraiya has referred the decision to the upper tribunal, meaning the FCA’s findings are provisional. He did not immediately respond to a request
The punishment comes amid a wider reckoning for those involved in cum-ex and cum-cum trading strategies, which involved exploiting jurisdictions which offered favourable dividend tax treatment.
The FCA has already issued £22.5m in fines to six individuals involved in the schemes against countries like Germany, Denmark and Belgium.