FCA fines award winning firm over £600k

The regulator says it is the second case it has brought related to cum-ex trading, dividend arbitrage and withholding tax (WHT) reclaim schemes. 

Sunrise Brokers, an inter-dealer broker based in central London and with offices in Hong Kong and New York City, boasts on its website of having won a number of awards, including Equity Products Broker of the year from Risk magazine. It says it has won the award for 13 years in a row. 

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.

The Solo trading throughout the period was characterised by a ‘circular pattern’ of purported trades – characteristics which are highly suggestive of financial crime, the FCA said. 

The trading appears to have been carried out to allow the arranging of withholding tax reclaims in Denmark and Belgium.

Sunrise failed to identify or escalate any potential financial crime concerns or suspicions when it should have done, said the FCA. In one case it executed a trade on behalf of a broker client, introduced by the Solo Group, at nearly twice the prevailing market price of the stock. In another case it 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.”

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