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Bastion Capital is fined £2.45 million in the FCA's fifth case related to cum-ex trading

Posted on 25 September 2023

On 13 July 2023, the FCA imposed a financial penalty of £2,452,700 on strategic advisory and brokerage firm, Bastion Capital London. The firm, now in liquidation, was found to have committed serious financial crime control failings in relation to cum-ex trading and failed to manage the risk of being used to facilitate fraudulent trading and money laundering. 

The penalty was reduced from an original figure of £2,837,600 following a 30% settlement discount. 


The FCA found that between 29 January 2014 and 29 September 2015, Bastion had executed trading of £49bn in Danish equities and £22.5bn in Belgian equities, on behalf of its hedge fund 'Solo Group' clients. The trading had been carried out in a way that was "highly suggestive of sophisticated financial crime", in order to make illegitimate withholding tax reclaims in Denmark and Belgium. Bastion received commission of £1.55m, a significant proportion of the firm’s revenue in the period. 

In addition, Bastion executed a series of trades on behalf of 11 Solo clients on four days, in German and Belgian listed stocks. Opposite positions were then executed by the same clients within hours, at significantly different prices, which resulted in a loss of €22.7m for one Solo client (Ganymede Cayman Ltd, an entity wholly owned by the Solo Group’s controller) to the benefit of the remaining 10 Solo clients.   

The FCA considered that Bastion either ignored or failed to notice a number of "clear red flags which should have alerted them to the risk of being used for financial crime": 

  • Its policies and procedures were inadequate for identifying, assessing and mitigating the risk of financial crime posed by the Solo Group business (i.e., inadequate processes and procedures for enhanced due diligence, client categorisation, transaction monitoring, and a failure to establish risk assessment requirements) 
  • It failed to act with due skill, care, and diligence by failing to properly assess, monitor and manage the risk of financial crime associated with the business related to the Solo Group.  

The trades were found to have held no economic purpose, save for transferring funds from the Solo Group's controller to his business associates. The FCA found that Bastion ought to have considered financial crime risks when onboarding these clients and when executing the trading.   


This is the latest action in the FCA crackdown to curb cum-ex trading, and the fifth one by the FCA in recent years. To date, the FCA's financial penalties in the crackdown against trading of this kind exceed £20 million (imposed on firms that have earned over £7 million in fees from this trading). 

The decision follows the FCA's biggest financial penalty to date in this area, with ED&F Man Capital Markets Ltd fined £17.2m in June 2023. This case is a reminder that where customers engage in trades which on their face have no economic rationale, firms should examine the circumstances to understand whether there is a legitimate purpose.   

This case is particularly interesting because Bastion is in liquidation. Often where that is the case, the FCA will waive the penalty so as not to penalise creditors. In this case, however, the FCA has decided that the financial penalty must be admitted in the liquidation of the Firm by no later than 14 days from the date of the Final Notice and the financial penalty will be ranked with other creditors of the Firm. However, the FCA has said that it will "keep it under review in order that legitimate creditors are satisfied prior to any funds realised in the liquidation being used to pay some, or all, of the financial penalty." Evidently, the FCA considers that Bastion may not be insolvent, or alternatively that some of the creditors may not be "legitimate" and wants to ensure that the penalty ranks ahead of any distributions to shareholders or connected persons. 


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