Banks’ Role In Dividend Arbitrage Under Fed’s Radar

U.S. regulators are turning a critical eye to the practice of dividend arbitrage, as banks rake in over $1 billion in annual revenue by exploiting the strategy, reports The Wall Street Journal. The strategy used to be an even bigger business earlier, before U.S. tax authorities made it harder to shrink dividend taxes on U.S.-listed stocks.

Dividend arbitrage: A low-down on the strategy

The complicated “dividend arbitrage” strategy is run largely from London,  according to a report in the Wall Street Journal by Jenny Strasburg, where banks temporarily transfer ownership of a client’s shares to a lower-tax jurisdiction around the time when the client anticipates to collect a...