The High Court has dismissed an application for a judicial review from a former JP Morgan Chase trader involved in the ‘London whale’ case, who had appealed to prevent the Financial Conduct Authority dropping an enforcement investigation into his conduct.
Julien Grout was a junior derivatives trader and assistant to Bruno Iksil, the more senior trader known as the “whale”.
Mr Iskil’s conduct landed JP Morgan a £137.6m fine from the City watchdog in September 2013, following breaches in connection with the $6.2bn trading losses sustained by his chief investment office division in 2012.
Mr Grout was not named in this final notice, but he contended that he was ‘identified’ in it for the purposes of section 393 of the Financial Services and Markets Act. He said the publicity of the case had been such that anyone reading the notice would know “the traders” could only mean him and Mr Iksil.
The FCA began investigating Mr Grout, but then stopped due to the US criminal action alleging that he falsified bank records by artificially inflating the reported value of credit default swaps.
Mr Grout brought judicial review proceedings in the High Court against the regulator, stating that the decision to abandon the investigation was irrational and placed too much weight on the US legal proceedings. Mr Grout also claimed he was treated differently to others in the same position.
In the ruling, Judge Males noted that it may seem surprising that Mr Grout should want the FCA to continue to investigate his conduct.
“Many subjects of an FCA investigation would be relieved to hear that the FCA had decided not to proceed further. But Mr Grout says that he wants the investigation to continue so that he can clear his name,” he explained.
In his decision, the judge concluded the FCA’s decision to terminate its investigation was entirely rational and dismissed the application for judicial review.
“The matters which it took into account were legitimate considerations and it was for the FCA to determine what weight to give to them,” stated the judge. “It cannot be said that the weight given to any consideration was manifestly disproportionate.”
The ruling added that forum exists in which Mr Grout has an opportunity to clear his name, namely the criminal proceedings in the US.
Within 42 days, Mr Grout must now pay the FCA’s costs, which are assessed on the standard basis to be £28,958.
Mr Grout, who resigned from JP Morgan in 2012, was interviewed by the FCA in early 2013 and was told transcripts would be provided to US regulators.
The US Securities and Exchange Commission brought a civil complaint against Mr Grout and Mr Iksil’s supervisor Javier Martin-Artajo in August 2013, with the pair indicted on charges of conspiracy, falsifying books and records and causing false statements to be made later that year.
As a protected witness with immunity from prosecution, there are no corresponding criminal proceedings against Mr Iksil.
peter.walker@ft.com
