28/08/19

Alleged Tax Evasion Investigated at Deutsche Börse Offices.

As published on fnlondon.com, Tuesday August 27, 2019.

Public prosecutors have raided the offices of Deutsche Börse as part of an investigation into trades that were allegedly used to falsely claim tax rebates.

The search, which took place at the exchange’s Clearstream settlement house on August 27, according to Handelsblatt, the German business newspaper, relates to an examination of trades made around company dividend payments.

Deutsche Börse noted in its financial report for the first half of the year, published last month, that the public prosecutor’s office in Cologne had told Clearstream in September 2017 it had begun proceedings for tax evasion against a Clearstream employee, who was allegedly involved in settling transactions relating to the dividend trades.

In January 2018, the Cologne prosecutor’s office sent “a notification of hearing” to Clearstream subsidiaries in Frankfurt and Luxembourg as “potential secondary participants”.

The investigation centres on so-called cum-ex dividend trades. Dividend payments typically depend on when shares are purchased: if a buyer makes the purchase before a specific date, they are eligible for the dividend. Whether or not the buyer is entitled to that dividend plays a role in the value of the shares.

Cum-ex refers to shares that do not entitle the holder to the upcoming dividend payment. The trades in question were allegedly used to claim dividend tax rebates for multiple parties. In 2012, Germany ended the loophole that enabled the practice.

Deutsche Börse said in a statement: “It is confirmed that searches of Deutsche Börse Group premises are taking place today as part of international investigations into cum-ex cases. The searches are carried out as part of investigations against customers and employees. As in the past, Deutsche Börse is cooperating fully with the investigating authorities.”

The Cologne public prosecutor’s office declined to comment.

Clearstream is a vital cog in financial markets. It is a rival to Euroclear, the Belgian-based settlement house owned by more than 100 shareholders.

Clearstream’s net revenue amounted to €384.8m in the first half of 2019, up 7% on the corresponding period a year earlier. Its assets under custody averaged €11.4tn during the period.