19 May 2015
We reported in Enforcement Watch 13 on the Upper Tribunal judgment in April 2014 on when a third party was identified in a relevant Notice and had consequent third party rights in relation to it (see "10 April 2014: Upper Tribunal London Whale finding on identification of an individual"). As we reported, the matter was then appealed by the FCA. The Court of Appeal has now handed down its judgment.
Readers will have the background to this case in our Enforcement Watch 13 article. But briefly put, the background to the case was the London Whale affair. A senior individual at JPMorgan Chase (Achilles Macris) argued that, although he had not been referred to by name, he had nevertheless been identified in the Notices given to the Bank and that he had been prejudiced. If so, under s393 FSMA, he ought to have been accorded third party rights.
It was common ground that, if he had been identified, he had been prejudiced. The issue was whether he had in fact been identified. The Upper Tribunal found that he had indeed been identified. The FCA appealed to the Court of Appeal.
The Court of Appeal agreed with the Upper Tribunal that Macris had been identified (and prejudiced) and should therefore have had third party rights. However, it set out the test for identification somewhat differently from the Upper Tribunal. Drawing to an extent on the law of defamation as analogous (except in respect of one important proviso), it set out the test as follows:
- The first stage of the test was to ask by reference to the Notice alone whether the relevant statements identified a person other than the person to whom the Notice had been given. That is, for this part of the test, it was not permissible to look at external material.
- To be identified, it was not necessary to be identified by name.
- However, identification did require reference to a person. That is, it was not enough for example to say as one would in defamation for example that there was a reference to a person by implication because of what was generally said in a Notice. So, for example, the mere fact that a statement criticising a corporate recipient might be read by people in the relevant financial market as criticising the Chairman would not of itself be sufficient. There has to be some "key or pointer."
- Having determined that a person other than subject of the Notice was identified, it was then legitimate to have regard to external material in order to identify the person identified.
- As to what external material it was permissible in those circumstances to consider, one looks objectively at whether people acquainted with the person or those who operated in his area of the financial services industry and so had the requisite specialist knowledge of the relevant circumstances, would believe it was that person.
The Court of Appeal had no difficulty in finding that, even though Macris had not been mentioned either by name or by job title, he had nevertheless been identified. The references in the Notice to CIO London management were references to an individual, and that individual was Achilles Macris.
You can read the Court of Appeal's decision here.
We wrote in our commentary on the case in front of the Upper Tribunal about the very real practical implications generally of a finding that Macris had been identified.
The Court of Appeal also stated that Macris himself was under investigation. This finding that he should have been given third party right in the corporate's case will presumably cause some real headaches for the FCA in its case against him.
Beyond the practical issues, it is also interesting to consider where this case may now go as, in some respects, the precise practical ambit of the new test is not clear. For example, the Court of Appeal rather suggested that the Upper Tribunal's test was too wide, by permitting at the second stage unlimited reference to public domain material. The Court of Appeal suggested an objective test. This was based on what information would objectively be known by those acquainted with the person/those with specialist knowledge. However, it is not clear how one decides for example what might objectively be known by someone acquainted with that person. That is a matter that we would expect to be resolved by witness evidence of what such people in fact knew. What is more, what those people in fact knew may well be significantly more than is in the public domain. If that was permitted to be considered, the material that could be taken into account could be far wider and more uncertain than set out in the Upper Tribunal's decision.
The FCA asked for permission to appeal to the Supreme Court, but was refused. We shall have to see whether it takes the matter further. It may well wish to do so.
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