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Threatening billions of fines: cum-cum raid on French banks

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Threatening billions of fines: cum-cum raid on French banks

The transactions, also known as “dividend stripping”, involve the rapid purchase and sale of shares around the dividend date in order to have capital gains taxes reimbursed several times by the tax authorities. On the day before the dividend payment, this is priced into the share price. On the stock exchange one speaks of a course “cum dividend”.

On the day after the distribution, usually one day after the annual general meeting that decides on the dividend payment, the stock exchange operators deduct the dividend from the price, i.e. the share is traded “ex dividend”. The share buyers and sellers received confirmation from the banks that they had paid the capital gains tax, which they claimed from the tax authorities several times – although they had not paid in this way.

An example: The banks sell the shares short on a “cum” day, but because of stock exchange regulations they only have to deliver them to the buyer after two days. You procure the securities after the dividend date at the “ex” price – i.e. without dividends – from a third party and deliver these shares to the buyer. Hedging transactions concluded in parallel, which exclude risks, secure the profit from the transaction.

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