Court of Appeal backs FCA in London Whale case

Court of Appeal backs FCA in London Whale case

The Court of Appeal has ruled in favour of the Financial Conduct Authority after a trader tried to claim the regulator had identified him in a decision notice.

Julien Grout was one of four traders in JP Morgan Chase Bank's synthetic credit portfolio and claimed he was identified in an FCA decision notice when it fined the bank £137.6m.

He complained in 2013 the FCA identified him in its highly critical assessment involving the ‘London Whale’ trading debacle because the notice referred to "traders on the SCP" and provided other references which, he claimed when pieced together with other publically available pieces of information, would have identified Mr Grout.

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This is the second time the FCA has had to defend itself from having identified someone in this notice, with the international chief investment officer of JP Morgan Chase Bank, Achilles Macris, unsuccessfully attempting to make the same argument.

In the case involving Mr Grout, Lord Justice Longmore said: "I cannot read these references to 'one trader' as being a synonym for Mr Grout. It is so deliberately vague that it can legitimately be described as 'anonymous' rather than 'synonymous'.

"It is, moreover, relevant that the references to one trader appear in a section of the notice that is critical of (and thus prejudicial to) CIO management (on one view of the matter Mr Macris) rather than to the one trader referred to.

"In the context of the notice, read as a whole in all its 62 pages, it is impossible to say that it identifies Mr Grout."

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 (£4.3bn) 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.

Last year the Supreme Court ruled in favour of the FCA when Mr Macris attempted to claim he had been identified.

Kim Potts, a lawyer at criminal defence law firm Corker Binning, said: "After the Supreme Court ruled in favour of the FCA last year in a long running case brought by another JPMorgan trader, Achilles Macris, the decision of the Court of Appeal is unsurprising.

"The decision re-affirms the message to all individuals working in the financial markets that unless they are able to present very strong evidence that an FCA notice identifies them to the public at large, they will face a significant difficulty in enforcing their third party rights.

"Had Mr Grout and his colleague Mr Macris been ultimately successful in their challenges, this would have led to a very significant burden for the FCA in having to completely change the way in which they present notices or face dealing with what may have been a huge number of representations from individuals that were identified.