UK: Court Of Appeal Agrees That Individual Had Been Harpooned In London Whale FCA Proceedings Financial Conduct Authority v Macris (2015)

The Court of Appeal has found that the FCA breached section 393 of the Financial Services and Markets Act 2000 ("FSMA"), by publishing notices from which it was possible to identify a specific individual, without giving him an opportunity to respond to the assertions made against him, and that it did not matter that the individual had not been expressly named in the notices.

In September 2013, the FCA issued and published a series of notices to JP Morgan Chase Bank NA ("JP Morgan"), containing a financial penalty of almost GBP 138 million as a result of losses (widely referred to as the "London Whale" trades) incurred in a trading portfolio managed by JP Morgan for its parent company. The FCA notices contained criticisms of JP Morgan's management of a particular trading portfolio within its Chief Investment Office in London and New York. Mr Macris was International Chief Investment Officer in that management structure. Although Mr Macris was not referred to by name in the notices, he maintained that descriptions of JP Morgan's management structure were sufficiently specific as to identify him. Section 393 of FSMA provides that a third party prejudicially identified in an FCA notice must be given a copy of the notice and a reasonable period within which to make representations to the FCA.

The Court of Appeal considered the meaning of "identify" within section 393 and held that an objective test applied, similar to that used in defamation proceedings: are the words used in the "matters" such as would reasonably in the circumstances lead persons acquainted with the claimant/third party, or who operate in his arena of the financial services industry, and therefore would have the requisite specialist knowledge of the relevant circumstances, to believe at the date of the Notice that he is a person prejudicially affected by the matters stated in the Notice. In this case, the external material available (such as a US Senate Report which expressly referred to Mr Macris by name), entitled the first instance judge to conclude that Mr Macris had been identified.

The FCA announced in June that it is seeking to appeal this decision.

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