City regulator the Financial Conduct Authority (FCA) did not wrongfully identify a JPMorgan Chase executive when it fined the bank in 2013, the Supreme Court has ruled.
Giving judgment today in Financial Conduct Authority v Macris, the Supreme Court overturned the Court of Appeal's finding that Achilles Macris’s identity had been wrongly exposed.
Macris was responsible for the bank's ‘Synthetic Credit Portfolio’, which ran up $6.2bn (£5bn) in losses in 2012. Its activities became known as the ‘London Whale’ trades, because of the magnitude of the losses.
The FCA concluded that the loss was caused by, amongst other things, a high-risk trading strategy and weak management of that trading. It agreed a regulatory settlement of £137.6m with the bank.
Under the Financial Services and Markets Act 2000, the imposition of penalties requires three successive notices to be given to a person or firm under investigation. Where notices contain material discreditable to identifiable individuals not party to the settlement, the act makes provision to protect these persons from unfair prejudice.
Macris was not supplied with a copy of the notice or given an opportunity to make representations.
Although FCA notices did not explicitly name Macris, they made references to ‘Chief Investment Office London management’. At the time, Macris was international investment chief of JP and head of the bank’s Chief Investment Office.
Macris brought a claim before the Upper Tribunal, which upheld his complaint on the basis that the references would be taken by a reader with relevant experience to refer to the most senior individual involved – Macris himself.
The Court of Appeal agreed. It said people who operated in Macris’s field would reasonably have been able to identify him.
The FCA then appealed to the Supreme Court.
In today’s ruling the court ruled in favour of the FCA with a four-to-one judgment. Lord Wilson dissented.
Delivering the lead judgment Lord Sumption said the wording of the notice could have applied to more than one person at the bank.
Alison Geary, counsel at international firm WilmerHale, said the judgment required a ‘balancing act’ between the need for the FCA to move forward with investigations and the rights of individuals who are the subject of investigations.
‘Here the scales have been tipped firmly in favour of the FCA. Finding a definition of who is identified that provides certainty to the FCA was done at great cost to individuals, who are left without means to challenge extremely serious allegations against them,’ she said.