Out-Law News 3 min. read

Supreme Court backs regulator in investment bank management identification case

The Financial Conduct Authority (FCA) did not improperly identify a manager at an investment bank in its final notice imposing a fine on that bank for losses incurred in a particular part of the business, the Supreme Court has ruled.

A majority of four Supreme Court judges to one found that the use of the words 'CIO London Management' by the FCA in its notice was not sufficiently precise to identify Achilles Macris, who was head of the bank's chief investment office (CIO) in London at the relevant time. Had Macris been identifiable, the FCA would have been required by law to give him the opportunity to formally respond to the notice before it could be published.

Although Macris was not the only manager employed by the bank's CIO, he argued that those who were "active in the relevant markets" would have known that the description applied to him. Macris had also been named in a report by a US Senate committee dealing with the same losses, which was available on the internet at the relevant time.

However, Lord Sumption, giving the judgment of the court, said that there was a distinction to be drawn between publicly available information enabling identification of the individual and what he referred to as "additional facts".

"In my opinion, a person is identified in a notice ... if he is identified by name or by a synonym for him, such as his office or job title," he said. "In the case of a synonym, it must be apparent from the notice itself that it could apply to only one person and that person must be identifiable from information which is either in the notice or publicly available elsewhere."

"However, resort to information publicly available elsewhere is permissible only where it enables one to interpret (as opposed to supplementing) the language of the notice. Thus a reference to the 'chief executive' of the X Company may be elucidated by discovering from the company's website who that is. And a reference to 'CIO London Management' would be a relevant synonym if it could be shown to refer to one person and that person so described was identifiable from publicly available information. What is not permissible is to resort to additional facts about the person so described so that if those facts and the notice are placed side by side it becomes apparent that they refer to the same person," he said.

The Supreme Court overturned earlier decisions by the Court of Appeal and Upper Tribunal in reaching its decision. The lower courts had both found that the FCA had in effect identified Macris, both because of the publicly available external material and because 'CIO London Management' was used as a synonym for "an individual, ascertained by reference solely to the terms of the notice itself".

The FCA fined the bank £137.6 million for the loss, after finding that it had been caused by "a high risk trading strategy, weak management of that trading and an inadequate response to important information which should have alerted the bank to the problems". The bank had also "withheld significant information from [the FCA] while the losses were being incurred", the court was told.

Macris himself was later fined £762,900 by the FCA for individual failings in relation to the same incident.

Financial regulation expert Michael Ruck of Pinsent Masons, the law firm behind Out-Law.com, said that the distinction between 'public information enabling interpretation of the language of the notice' and 'additional facts about the person which taken in conjunction with the notice make it apparent they are the same person' "may be regarded as semantics". However, the rules had to strike a careful balance, he said.

"The risk which must be addressed by the FCA is that action is implemented against third parties via the 'back door' of a regulatory notice for a corporate or other individual," he said. "The ability of others to identify third parties who have not been given the protections afforded to those formally subject to investigation or regulatory sanction will almost inevitably result in prejudice to them, for example in the form of difficulty finding alternative employment despite having no formal sanction imposed against them."

"Whilst it must be accepted that the FCA has its regulatory objectives to meet, the protections afforded to those investigated and subject to regulatory sanction should not be undermined or circumvented, intentionally or otherwise, by being identifiable in the public notice for another subject of investigation. In an environment where the Senior Managers' Regime has been acknowledged by the FCA to have a negative impact on the number of firms willing to settle with the FCA given the impact this is likely to have on senior management, by analogy, any notices illustrating this settlement will be argued extensively by firms which seek to avoid this impact," he said.

We are processing your request. \n Thank you for your patience. An error occurred. This could be due to inactivity on the page - please try again.