The FCA said the failings allowed the firm to collect millions of pounds of fees for the trading strategy as its clients illegitimately reclaimed tax from Danish authorities.

Cum-ex trading involves placing shares in alternative tax jurisdictions around dividend dates, with the aim of minimising withholding tax or generating withholding tax reclaims.

Between February 2012 and March 2015, the FCA said ED&F Man “enabled significant volumes of dividend arbitrage trading on behalf of clients, allowing clients to make withholding tax (WHT) reclaims.”

The FCA said: “It is established that £20m of the WHT reclaims made by MCM’s [ED&F Man Capital Markets] clients to the Danish tax authority (SKAT) were illegitimate.

“A Dubai based trading firm within the same corporate group as MCM participated in the trading strategy which resulted in these illegitimate WHT reclaims from SKAT.”

The withholding tax reclaims were illegitimate because no shares were owned or borrowed, no dividend was received, and no tax was paid, the FCA said. The firm generated £5.06m in fees from the strategy.

Therese Chambers, joint executive director of enforcement and market oversight, said: “It is completely unacceptable for authorised firms to make money from this kind of trading. It’s essential that all firms have the right controls and expertise in place to avoid the risk of being used to facilitate financial crime.”

ED&F Man said the FCA’s action relates to a legacy business area that was shut down in 2015. “It was specifically excluded from the sale of assets to Marex and is a contingent liability that was ring-fenced as part of that transaction. It will now be possible to take the final steps in deregulating and closing the MCML business.”

ED&F Man was bought by Marex in 2022 in a £170m deal.

The fine marks the fourth case brought by the FCA against cum-ex trading and is the largest fine for cum-ex trading so far.

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