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HSBC Likely to Pay $300M to Settle "Cum-Cum" Tax Lawsuit in France
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Key Takeaways
HSBC is likely to pay about $300M to settle French "Cum-Cum" allegations and end a criminal probe.
The proposed deal includes repayment of related tax bills and aligns with HSBC's prior provision.
French prosecutors will present the settlement soon, mirroring actions seen with Credit Agricole.
HSBC Holdings PLC (HSBC - Free Report) is likely to pay roughly $300 million to resolve its alleged involvement in the French “Cum-Cum” tax scandal, which has ensnared several major banks in the country. This was reported by Reuters in an article, citing Bloomberg, which cited people familiar with the matter.
Details of the HSBC Lawsuit
Authorities in France estimate that Cum-Cum transactions may have deprived the government of roughly €4.5 billion in tax revenues. Regulators are now working to recover those losses. The strategy allegedly allowed foreign investors to avoid withholding taxes by temporarily transferring their French shares to a tax-exempt entity, typically a local bank, during the dividend period.
French prosecutors at the Parquet National Financier ("PNF") are expected to present a proposed settlement before a Paris judge in the coming weeks. The agreement would close the criminal probe into HSBC’s alleged dividend-arbitrage trades.
As part of the negotiations, HSBC is also said to have discussed a parallel arrangement with French tax authorities to resolve related civil claims. The combined amount aligns with the $300 million provision the bank recorded earlier this year, tied to the investigation.
French prosecutors have made repayment of Cum-Cum–related tax bills a requirement for any criminal settlement. HSBC’s deal is expected to follow this framework and would not involve an admission of guilt, consistent with how French judicial resolutions are typically structured.
The settlement follows a similar move by Crédit Agricole, which paid €134 million in fines and back taxes in September. The case has intensified scrutiny of several other banks raided by the PNF in 2023, though none have been formally accused of wrongdoing.
HSBC Zacks Rank & Price Performance
Shares of HSBC have rallied 49.8% this year, outperforming the industry’s growth of 47.9%.
Last month, the U.S. Securities and Exchange Commission (SEC) probed Jefferies Financial Group Inc. (JEF - Free Report) over its connections with First Brands Group. This was reported by Reuters, citing the Financial Times, which cited people familiar with the matter.
The regulator is examining whether Jefferies adequately informed investors in its Point Bonita fund about their exposure to the auto business. It is also reviewing the company’s internal controls and any potential inter-divisional conflicts. The SEC’s investigation is in its early stages, and it is uncertain whether it will lead to misconduct allegations.
Similarly, the Federal Deposit Insurance Corporation filed a lawsuit against Capital One (COF - Free Report) , alleging that the bank paid about $100 million less than it should have to help bail out depositors of Silicon Valley Bank and Signature Bank, which both collapsed in 2023. This was reported by Reuters.
The main concern of the dispute is whether Capital One understated its level of uninsured deposits by excluding a $56 billion position between two subsidiaries from regulatory filings that describe its financial condition.
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HSBC Likely to Pay $300M to Settle "Cum-Cum" Tax Lawsuit in France
Key Takeaways
HSBC Holdings PLC (HSBC - Free Report) is likely to pay roughly $300 million to resolve its alleged involvement in the French “Cum-Cum” tax scandal, which has ensnared several major banks in the country. This was reported by Reuters in an article, citing Bloomberg, which cited people familiar with the matter.
Details of the HSBC Lawsuit
Authorities in France estimate that Cum-Cum transactions may have deprived the government of roughly €4.5 billion in tax revenues. Regulators are now working to recover those losses. The strategy allegedly allowed foreign investors to avoid withholding taxes by temporarily transferring their French shares to a tax-exempt entity, typically a local bank, during the dividend period.
French prosecutors at the Parquet National Financier ("PNF") are expected to present a proposed settlement before a Paris judge in the coming weeks. The agreement would close the criminal probe into HSBC’s alleged dividend-arbitrage trades.
As part of the negotiations, HSBC is also said to have discussed a parallel arrangement with French tax authorities to resolve related civil claims. The combined amount aligns with the $300 million provision the bank recorded earlier this year, tied to the investigation.
French prosecutors have made repayment of Cum-Cum–related tax bills a requirement for any criminal settlement. HSBC’s deal is expected to follow this framework and would not involve an admission of guilt, consistent with how French judicial resolutions are typically structured.
The settlement follows a similar move by Crédit Agricole, which paid €134 million in fines and back taxes in September. The case has intensified scrutiny of several other banks raided by the PNF in 2023, though none have been formally accused of wrongdoing.
HSBC Zacks Rank & Price Performance
Shares of HSBC have rallied 49.8% this year, outperforming the industry’s growth of 47.9%.
Image Source: Zacks Investment Research
Currently, HSBC carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Litigations Faced by Other Finance Firms
Last month, the U.S. Securities and Exchange Commission (SEC) probed Jefferies Financial Group Inc. (JEF - Free Report) over its connections with First Brands Group. This was reported by Reuters, citing the Financial Times, which cited people familiar with the matter.
The regulator is examining whether Jefferies adequately informed investors in its Point Bonita fund about their exposure to the auto business. It is also reviewing the company’s internal controls and any potential inter-divisional conflicts. The SEC’s investigation is in its early stages, and it is uncertain whether it will lead to misconduct allegations.
Similarly, the Federal Deposit Insurance Corporation filed a lawsuit against Capital One (COF - Free Report) , alleging that the bank paid about $100 million less than it should have to help bail out depositors of Silicon Valley Bank and Signature Bank, which both collapsed in 2023. This was reported by Reuters.
The main concern of the dispute is whether Capital One understated its level of uninsured deposits by excluding a $56 billion position between two subsidiaries from regulatory filings that describe its financial condition.