The Supreme Court judgment’s in the case of ex-JPMorgan manager Achilles Macris versus the Financial Conduct Authority saw our legal masters rule in favour of the regulator.
Mr Macris argued the regulator wrongly allowed him to be identified in paperwork linked to the London Whale scandal.
The Supreme Court has ruled that the FCA did not identify Achilles Macris in a decision notice when it fined JP Morgan Chase Bank £137.6m.
The bank’s international chief investment officer complained in 2013 that the FCA identified him in its highly critical assessment involving the ‘London Whale’ trading debacle, without giving him the chance to defend himself.
In his judgement, published on 22 March, Supreme Court justice Lord Sumption ruled that none of the terms used by the FCA as synonym’s for Mr Macris would have identified him to the general public.
What the Supreme Court has done is weaken the protection afforded to individuals under the Financial Services and Markets Act.He said: “The real question is whether the terms of the notice itself would have conveyed to a reasonable member of the public without extrinsic information that any of these terms was a synonym for Mr Macris. Plainly it would not.”
The fine related to trading losses incurred by the bank’s Synthetic Credit Portfolio, a trading portfolio housed within the bank’s chief investment office.
Those losses amounted to $6.2bn (£4.9bn) by the end of 2012 and occurred as a result of what became known as the “London Whale” trades, which were conducted by traders Javier Martin-Artajo and Bruno Iksil, but ultimately overseen by Mr Macris.
Mr Macris filed a claim against the FCA alleging that he could be identified in decision and final notices issued by the City watchdog.
A judge in the Upper Tribunal agreed with this assessment last April, but the regulator appealed, arguing that it had not explicitly named Mr Macris in the publications.
While the judgment of the Supreme Court will have been a relief for the FCA it should worry anyone working in the financial services industry today.
The overturned Court of Appeal decision exposed the tension between the FCA’s desire to quickly settle regulatory investigations into financial institutions and its public criticism of the employees of those companies.
The time and resources required to deal with the interventions and representations of a potentially very large pool of individuals would have been a very heavy burden for the FCA and could have significantly slowed the speed of regulatory enforcement.
While nobody wants to see the cost of regulation added to by bosses at financial services firms arguing their name shouldn’t be dragged into some scandal, what the Supreme Court has done is weaken the protection afforded to individuals under the Financial Services and Markets Act.
The rules were designed to provide individuals with an opportunity to defend themselves when their identification was unavoidable.
In this age of swift Tweets, instant messaging and social media shares, “news” of a scandal can spreads fast and far not just through the trading floors but throughout the wider world.
If an individual can be identified by information in the public domain their professional peers will quickly join the dots – and not always produce the full picture of what really went on.
In the City and financial services industry reputation is hard won and easily lost. I fear this decision by the Supreme Court threatens to inflict unfair harm for little obvious benefit.
If there is any sort of black mark associated with your name, working in the financial services industry where trust is key will not be easy.
It is worrying that individuals in such a case can be readily and often unfairly identifiable.
As Catherine Robinson, solicitor at law firm Byrne & Partners, points out: "One would hope the regulator has been chastened to some extent by its experience and will shy away from what might potentially be reckless identification of individuals in the pursuit of an efficient settlement with a firm before the individual has had the opportunity to be heard."
I would agree. As Ms Robinson says: "It is more important than ever that the regulator keep an open mind in dealing with individuals as well as firms especially in circumstances where action against the individual ultimately fails."
emma.hughes@ft.com
