FCA v. Macris: Who is identified in FCA investigation notices?


On 22 March 2017, the Supreme Court handed down judgment in FCA v. Macris. The case turned on the meaning of the word “identifies” in section 393 of the FSMA.   The Court favoured a restrictive definition. The effect is that notices will not need to be served on, and representations invited from, as many individuals as might otherwise have been the case. The FCA will be breathing a collective sigh of relief, but persons connected to investigations will be concerned about exposure to reputational risk.

By way of background, within JP Morgan Chase, there was a unit known as CIO International, which managed excess deposits. This included a portfolio of traded credit investments called the Synthetic Credit Portfolio. Mr Macris was head of the unit in London. In July 2012, JP Morgan announced that the portfolio had lost $5.8 billion, rising to $6.2 million by the end of the year. The case gained notoriety, with a trader becoming known as the “English Whale”. The FCA investigated the bank for various irregularities.   In due course, a regulatory settlement was agreed, under which the bank paid a penalty of £137.61 million.

Under the FSMA, the FCA is required to serve three notices on a firm or person under investigation, namely a warning notice, decision notice and final notice. Where a regulatory settlement is agreed, as in this case, such notices must still be given, but the practice is to serve them simultaneously. The FCA is required to publish the decision notice and the final notice.

Under section 393 of the FSMA, if a person other than the recipient (the recipient being the person under investigation) is identified in a warning notice, and the notice is prejudicial to that person, he must be given a copy of it. He must also be given a reasonable period of time within which he may make representations to the FCA. In this case, Macris did not have any such opportunity to make representations before publication of the decision notice and final notice.

Mr Macris was not identified by name or job title in the notices. However, “CIO London management” was referred to repeatedly, and he was the only London manager of the unit. There was publicly available information, in the form of a US Senate Committee report, which described his role and named him. Putting all the information together, a person might have deduced that “CIO London management” referred to him.

The Court of Appeal adopted a test from defamation law: Are the words such, as reasonably in the circumstances, would lead persons acquainted with the claimant to believe that he was the person referred to? It held in favour of Macris.

On the FCA’s appeal, the Supreme Court disagreed with this approach and allowed the appeal (by a 4-1 majority). According to Lord Sumption JSC, giving the leading judgment:

… a person is identified in a notice under section 393 if he is identified by name or by synonym for him, such as his office or job title. 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, Lord Sumption put restrictions on the extent to which information publicly available elsewhere may be used:

“… 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… 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”.

Lord Neuberger put the test in another way. A person is identified if: “(i) his position or office is mentioned, (ii) he is the sole holder of that position or office, and (iii) reference by members of the public to freely and publicly available sources of information would easily reveal the name of that individual by reference to his position or office”.

The conclusions were reached mainly from an examination of the language section 393, combined with large dose of pragmatism. As Lord Neuberger observed, there was “no entirely satisfactory logical basis for justifying any particular conclusion as to the precise point at which one draws the line between [the] two extremes [of the parties’ positions]”. An advantage in the restrictive approach was that the FCA would not be burdened with detective work to uncover the possibility of “jigsaw identification” of a third party.

However, the result will leave many people without any opportunity to make representations before notices are published. This is illustrated by the facts of Macris’ case. A published notice had referred to a telephone conversation during which the “management” was said to have misled the FCA (as described in Lord Wilson’s dissenting judgment). Macris was in fact the relevant party to the conversation. Such allegations were not replicated in notices served during the investigation of Macris as an individual. It seems that he never had the opportunity to counteract such allegations as part of the FCA investigatory process, and never will do.


Julia Faure-Walker