Since 2011, investigations into dividend arbitrage transactions have been ongoing in Germany with fines imposed on a number of banks and one institution shut down and insolvent. In total, around 100 financial institutions are said to be subject to investigations.
With the latest revelations by Correctiv (cumex-files.com), it appears that cum ex trades are still ongoing and affecting a significant number of other European countries as well. Given the German experience, this is likely to send a shock wave through various institutions, triggering public and internal investigations with fines and D&O litigation to follow.
Spain’s Banco Santander is the latest big bank to become embroiled in a sprawling German fraud investigation into a share-swapping scheme that allegedly allowed investors to reclaim billions of euros of tax they never paid. Prosecutors in Cologne, Frankfurt and Munich have spent several years probing so-called cum-ex transactions, which allowed investors to exploit a legal loophole that enabled multiple parties to claim a refund of taxes paid on share dividends.