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You are here: BAILII >> Databases >> United Kingdom Supreme Court >> Financial Conduct Authority v Macris [2017] UKSC 19 (22 March 2017) URL: http://www.bailii.org/uk/cases/UKSC/2017/19.html Cite as: [2017] 1 WLR 1095, [2017] WLR 1095, [2017] UKSC 19, [2017] Bus LR 643 |
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[2017] UKSC 19
On appeal from: [2015] EWCA Civ 490
JUDGMENT
Financial Conduct Authority (Appellant) v
Macris
(Respondent)
before
Lord Neuberger, President
Lord Mance
Lord Wilson
Lord Sumption
Lord Hodge
JUDGMENT GIVEN ON
22 March 2017
Heard on 13 October 2016
Appellant Jonathan Crow QC Paul Stanley QC (Instructed by The Financial Conduct Authority) |
|
Respondent Javan Herberg QC Ben Jaffey (Instructed by Clifford Chance LLP) |
LORD SUMPTION: (with whom Lord Neuberger and Lord Hodge agree)
1.
Mr Achilles Macris’s
complaint is that without giving him a chance to
make representations in his own defence, the Financial Conduct Authority has
published a notice imposing a penalty on his former employer for various
irregularities in the conduct of its business, in terms which identify him as
the person responsible. The question at issue on this appeal is whether the
notices in question did in fact identify him. This may look like a small point but,
for reasons which I shall explain, it has significant implications for the
conduct of the Authority’s investigatory and disciplinary functions.
3.
JP Morgan Chase Bank NA is authorised under the Act to carry on
regulated investment activities. In 2012 Mr Macris
was the Bank’s International
Chief Investment Officer. In that capacity, he was the head of a unit of the
Bank in London called the Chief Investment Office (or “CIO International”). The
function of CIO International was to manage the firm’s excess deposits,
including a portfolio of traded credit instruments called the Synthetic Credit
Portfolio. Mr
Macris’s
own functions were “controlled functions” for the
purpose of section 59 of the Act, which meant that he had to be approved by the
Authority as a suitable person to carry on those functions.
“If any of the reasons contained in a warning notice to which this section applies relates to a matter which -
(a) identifies a person (‘the third party’) other than the person to whom the notice is given, and
(b) in the opinion of the regulator giving the notice, is prejudicial to the third party,
a copy of the notice must be given to the third party.”
The object of this procedure is to enable the third party to make representations to the regulator. Subsection (3) requires a copy notice served on a third party to specify a reasonable period of time within which he may do so. Subsection (4) contains a corresponding provision relating to decision notices. The object here is to enable the third party to take the matter before the Upper Tribunal, as subsection (9) entitles him to do. These procedures need not be followed if a corresponding notice in relation to the same matter has been given to the third party in his own right: see subsections (2) and (6).
7.
Mr Macris
was not supplied with a copy of the notice served on the Bank
or given an opportunity to make representations. As an “approved person” he was
personally under investigation along with his employer. But he was not party to
the settlement with the Bank, and the investigation of his conduct was still in
progress at the time. Ultimately, in February 2016, Mr
Macris
reached his own
regulatory settlement. A final notice in relation to him was published on 9
February 2016, in which he was found to have been party to the withholding of
information from the Authority and on one occasion to have misled it. A penalty
of £762,900 was imposed on him.
8.
The Authority does not deny that if Mr Macris
was identified in the
warning and decision notices served on the Bank, there were statements in those
notices which were prejudicial to him. Their case is that he was not identified.
It is common ground that he was not identified by name or job title. But there
were many references to conduct by “CIO London management” or similar
expressions. Mr
Macris
was not the only manager in CIO International in London.
On the basis of the notice alone, therefore, “CIO London management” could have
referred to a number of people other than him. His case is that those who were
active in the relevant markets would have known that it referred to him. In
support of this case, he produced two witness statements in the Upper Tribunal,
neither of which was challenged. One was from a senior manager formerly
employed in CIO International in London, who said that it was clear to him that
“CIO London management” referred to Mr
Macris.
This was because of the
knowledge that he had acquired as a manager in the same unit. In particular, he
knew that Mr
Macris
was the head of that unit and was not in the habit of
sharing his responsibilities with others. The other witness was a senior sales
representative dealing in credit instruments for another bank in London. He
said that he drew the same conclusion because he knew about Mr
Macris’s
position and working methods from his dealings with CIO International. In
addition, Mr
Macris
relied on the fact that some five months before the service
of the notices on the Bank, a US Senate Committee had published a report on the
losses in the Bank’s Synthetic Credit Portfolio, which described his role in
the incurring and treatment of those losses, identifying him by name. This
report was available on the internet. It was said that if read side by side
with the Authority’s notices the Senate Committee report would enable anyone to
deduce who was being referred to as “CIO London management”.
9.
The Upper Tribunal directed the hearing as a preliminary issue of the
question whether Mr Macris
was entitled to be treated as a third party for the
purposes of section 393 of the Act. Judge Herrington upheld Mr
Macris’s
complaint and held that he was. He referred at para 13 of his judgment to para
4.3 of the final notice, which described the position of CIO International in
the Bank’s hierarchy in the following terms:
“4.3 The Firm is a wholly owned subsidiary of the Group. CIO operates within the Firm in both New York and London. The traders on the SCP were managed by SCP management, which in turn were managed by CIO London management. CIO London management represented the most senior level of management for the SCP in London, reporting directly to CIO Senior Management in New York, which in turn reported to Firm Senior Management. CIO also had its own Risk, Finance and VCG functions, which were control functions relevant to the SCP and other portfolios within CIO. The wider control functions within the Group included Internal Audit, Compliance and the Group’s Audit Committee.”
The judge then referred at para 16 to a number of places where the notices referred to acts as having been performed by an individual (eg “CIO London management sent an e-mail”). The essence of his reasoning appears at paras 45 and 46 of his judgment:
“45. In my view the drafting of para 4.3 is inconsistent with how a corporation would describe the hierarchy of its governing bodies. Collective bodies are responsible for the management of particular business units rather than managing them themselves and the bodies concerned would appoint named individuals to carry out the actual management in clearly defined reporting lines. What therefore comes across clearly from para 4.3 of the Final Notice is a description of the reporting lines of particular individuals to their line managers. The paragraph also discloses the fact that SCP management would manage rather than be purely responsible for the management of the individual traders who would therefore each say that their line manager was whoever was identified as SCP management. It is not the practice that an individual trader would report to a collection of individuals; it is the hallmark of good management that there can be no confusion over which individual a person reports to - he needs to know who his boss is and so he does not get conflicting messages. The reference to CIO London management being the most senior level of management for the SCP in London is also significant; again a reader with experience of how large corporations operate would take such a reference as being to the most senior individual concerned.
46. This initial impression that the reader would take from para 4.3 is reinforced by the fact that CIO London management is stated in the notice to have performed actions such as having conversations, attending meetings and sending e-mails which can only be taken in the context in which these events are described, as being the actions of an individual rather than a body of persons. This is clearly apparent from the references Mr Herberg referred me to as set out in para 16 above.”
10.
In the Court of Appeal Gloster LJ delivered the leading judgment, Patten
LJ agreeing with her generally and Longmore LJ agreeing “to the extent that it
is a question of law”. Gloster LJ declined (paras 52, 60) to adopt Judge
Herrington’s reasoning but agreed with him in the result, namely that the
references to “CIO London management” were references to “an individual,
ascertained by reference solely to the terms of the notice itself” (para 52).
She also considered (para 53) that the evidence adduced by Mr Macris
and
publicly available material such as the US Senate Committee report entitled the
judge “to conclude, on an objective basis, that persons acquainted with Mr
Macris,
or who operated in his area of the financial services industry, would
reasonably have been able to identify Mr
Macris
from the statements made in the
notice.” Gloster LJ’s view that the relevant audience was “persons acquainted
with Mr
Macris,
or who operated in his area of the financial services industry”
was based on an analogy, which she regarded as persuasive, between disclosure
under section 393 of the Act and publication in the law of defamation. In the
latter context, she drew attention after the hearing to the statement in the
current edition of Gatley on Libel and Slander, 12th ed (2013), paras
7.1, 7.2:
“The question in all cases is whether the words might be understood by reasonable people to refer to the claimant, subject to the qualification that where the words are published to persons who have special knowledge the issue will be decided by reference to what reasonable persons possessing that knowledge would understand by them. … The test of whether words that do not specifically name the claimant refer to him or not is this: Are they such as reasonably in the circumstances would lead persons acquainted with the claimant to believe that he was the person referred to?”
14.
Third, it is necessary to read section 393 in the light of the
practicalities of performing the Authority’s investigatory and disciplinary
functions. It is common for notices to be served on different parties to the
same investigation at different times. The possibility is expressly envisaged
in section 393 itself. The role of the firm or of the various individuals
involved may take more or less long to investigate. Or, as happened in this
case, one of them may settle before the others. Once the facts relating to one
person or firm under investigation are ascertained or admitted and are found to
justify criticism or sanctions, there will often be no proper reasons for
withholding that information from the market. Yet there will almost always be
people in the know, who will realise when they read the notices which
individuals are encompassed by apparently anodyne collective expressions such
as “management” or who is likely to have been responsible for particular
failings of the firm. The facts, or enough of them, may be well known within
the firm. They may be deduced by those who know enough about the firm’s procedures
or organisational structure or the business methods of the “third party” in
question. Even for those who are further from the scene, the internet is a
fertile source of information and gossip for those who are willing to go to
some trouble to discover his identity. The Authority will not necessarily know
what if any further information about the business, the facts or the
individuals involved may be available to knowledgeable outsiders or
discoverable from publicly available sources. In those circumstances it must be
able to ensure, by the way in which it frames its own notices, that a third
party is not “identified” in the notice, even if he or she is identifiable from
information elsewhere. The present case is a good illustration of the problem.
The Court of Appeal considered that the information relevant for the purpose of
identifying Mr Macris
included the US Senate Report, which identified him by
name. On that footing, once the Senate Committee had published his report, it
would have been impossible for the Authority to serve the notice on JP Morgan
as part of the settlement process, without serving a copy on Mr
Macris
at a
comparatively early stage of the investigation of his role, when it would not
necessarily know the relevant facts or have formulated any criticisms.
“Publishing notices is important to ensure the transparency of FCA decision-making; it informs the public and helps to maximise the deterrent effect of enforcement action.”
The relevant audience for this purpose is accordingly the
public at large. The fact that some specific sector of the public at large may,
like Mr Macris’s
witnesses, have special additional information enabling them
to identify a third party is not relevant.
17.
I do not accept, any more than the Court of Appeal did, the judge’s view
that because reporting lines lead to individuals, any reference to “management”
must be to an individual. Nor do I accept Mr Macris’s
argument that because the
notices referred to actions such as making statements, attending meetings or
sending e-mails, which must have been done by individuals, a single individual
is meant, as opposed to any of a number of individuals comprised within the
term “the firm”, “CIO” or “CIO management”. 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. I would therefore allow the appeal and declare
that Mr
Macris
was not a third party for the purposes of section 393 of the
Financial Services and Markets Act 2000.
LORD NEUBERGER:
22.
In this case, the addressee of the Notice, JP Morgan Chase Bank NA, was
Mr Macris’s
employer, and it did indeed pay a substantial penalty to the
Authority, no doubt with a view to putting an end to any proceedings on the
Notice. Mr
Macris
received a separate notice and contested before the Tribunal
the allegations in the notice served on him (which were substantially identical
to those in the Notice served on the Bank, which is the Notice to which he
claims section 393 applies). While some of the allegations against Mr
Macris
were upheld, the more serious ones, including one which at least implied that
he had not been honest in certain respects, were rejected. Had he not been
served with his own notice, Mr
Macris
would not have been able to challenge the
Notice served on the Bank, unless he had been “identifie[d]” in that Notice.
24.
On this appeal, it is not suggested on behalf of Mr Macris
that an
individual should be within the scope of section 393 simply because he could
show that one person could identify him from the terms of the notice. On the
other hand, the Authority accepts that section 393 cannot be limited to cases
where the individual concerned is mentioned by name in the notice. There is no
entirely satisfactory logical basis for justifying any particular conclusion as
to the precise point at which one draws the line between these two extremes.
27.
Apart from the notice having to mention the position or office, that
test has two essential features. The first is that it involves assessing the
identifiability of an individual by reference to what members of the public
generally know or could discover. A test that was satisfied by reference to a
specific and smaller group would give rise to difficulties as to where one
should draw the line as a matter of principle, and also as to how in practice
the Authority could know whether or not an individual satisfies the statutory
test. The second essential feature is that, in order to satisfy the test, any
research or investigation should be straightforward and simple, as would be the
case in relation to identifying who chairs the board of a UK-registered
company. In order to qualify, any investigation process should not require any
detective work; and so jigsaw identification, ie “correctly identifying someone
as a result of relating separate snippets of information” (Donald v Ntuli
[2011] 1 WLR 294, para 55), would not do. Similarly, the fact that Mr Macris
could be identified by reference to a publicly available US Senate Committee
report would not do because a member of the public would not know of that report,
and anyway would not think of referring to it for the purpose of identifying Mr
Macris
as the individual referred to in the Notice in this case.
30.
First, if section 393(1)(a) has a wider application than I have
suggested, there is no logical or principled reason for excluding from, or
indeed including in, its scope an individual who could be identified by a person
who is “personally acquainted with [him]”, to quote from Lord Wilson’s test.
Secondly, there could also easily be disagreements, which would have to be
resolved, as to whether, on disputed or agreed facts, a particular person falls
within that expression. Thirdly, as the facts of this case show, it may well be
that Mr Macris
could only have satisfied Lord Wilson’s test because of the
happenstance that he had been identified in a published US Senate Committee
report on various problems encountered by the Bank. Fourthly, these very facts
highlight the difficulties which the Authority could face if one gives section
393(1)(a) a wide meaning. Fifthly, even on Lord Wilson’s test, where a group of
two people is identifiable from a Notice, it could be damaging to both of them
if they could not clear their names, yet unless one of them could be
identified, neither of them would be within the section.
LORD MANCE:
32.
On the question of law, it is tempting to take the very broad view that
it is unfair if a person like Mr Macris
is not given the opportunity to address
criticisms in a final decision notice directed, as this was, to Mr
Macris’s
current employers, JP Morgan Chase Bank NA, in terms which future employers might
be able to ascertain by due diligence or investigation were in reality critical
of Mr
Macris.
But that would make the task of the Authority very difficult
indeed, and is not in my opinion the intention or effect of the language of
section 393 of the Financial Services and Markets Act 2000.
“a person is identified in a notice under section 393 if he is identified by name or by a 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, resort to information publicly available elsewhere is permissible only where it enables one to interpret (as opposed to supplementing) the language of the notice.”
This is what one may call a dictionary approach. But a notice is not issued into a vacuum, of which the only occupant is a dictionary. The dictionary is one aspect of publicly available information, and, once it is permissible to look at that aspect of publicly available information to supply the identity of a person who is being criticised in a notice, I am unclear why this should not, for example, also be permissible to show that a generic description such as “CIO London management” in a notice in fact describes only one person. In my view, the correct analysis is, rather, along the lines of the Authority’s primary case, viz that a matter (only) “identifies” a person if the identity of the person is apparent from the terms in which the matter is described or explained, read in the light of information generally or publicly available in the financial world (as distinct from information available only to persons acquainted with the person or his company).
34.
Judge Timothy Herrington in the Upper Tribunal treated section 393 of
the 2000 Act as involving a two-stage test. First, the decision notice must
direct criticism at a particular individual or the members of a particular
group of individuals. Second, that satisfied, such individual or individuals
could be identified for the purposes of section 393 by external material,
“regardless of whether the ordinary reader of the notice would be able to
establish that the criticisms relate to” the individual in question (para 37).
It was “not a question of whether any particular type of reader could identify
the individual concerned but simply whether there is information in the public
domain that incontrovertibly links the description in the Final Notice” to, in
this case, Mr Macris
(para 50). Judge Herrington considered (in my view, probably
incorrectly) that this analysis was consistent with that adopted by an earlier
Financial Services and Markets Tribunal decision in Watts v Financial Services
Authority FIN/2004/0024 (unreported) 7 September 2005. Judge Herrington
attached no significance to the fact that the British press had not in fact
worked out the identity of Mr
Macris
until by his present claim he prompted
them.
35.
The Court of Appeal considered that “Whether the relevant ‘matters’
‘identify a person’ for the purposes of section 393 is in one sense a unitary
question”, a proposition with which I agree, but went on to adopt Judge
Herrington’s two-stage approach as logical. It disagreed with the breadth of Judge
Herrington’s approach at the second stage of his two-stage approach. It said
that “there cannot be ex post facto unlimited reference to external
material to identify the third party”, and that identification could only be
made by reference to information “which objectively would be known by persons
acquainted with the third party, or persons operating in the relevant area of
the financial services market” (para 50). It is notable, however, that, in the
next paragraph of its judgment, the Court of Appeal referred to what such
persons “might reasonably have known”. Further, in para 51, after noting,
correctly in my view, that the failure of the press to identify Mr Macris
before his present claim was of some evidential relevance, the Court of Appeal
only upheld the judge’s conclusion on the basis that “had he applied the
objective test [which the Court of Appeal] formulated, [he] would have been
entitled to conclude on the evidence before him, that despite the fact that the
press had not previously latched on to the matter, the relevant sector of the
financial market would nonetheless have appreciated that it was Mr
Macris
who
was identified in the Notice as ‘CIO London management’”. Once it had concluded
that Judge Herrington had applied the wrong test, it was for the Court of
Appeal itself to apply the right test, not to consider whether a judge applying
the correct text might reasonably have arrived at the same result or would have
been entitled to do so.
“(3) Unless the complainant agrees, a report of a determination published by the scheme operator may not include the name of the complainant, or particulars which, in the opinion of the scheme operator, are likely to identify the complainant.”
The ambit of this provision may be regarded as confirming the limited scope of the third party protection intended under section 393.
“There is no reason in our view why a market abuse allegation directed at a company must necessarily be taken to impute criticism to particular individuals. We doubt whether undertaking the threefold steps which are said to be required, and looking at ‘publicly available sources’ to see whether any and if so which individuals were identified, would be a workable process.”
In the present case, I consider (contrary to the conclusion reached by Judge Herrington) that the criticism directed in the report to “CIO [ie Chief Investment Office] London Management” cannot by itself necessarily be taken to relate to any particular individual or individuals. However, it must relate to one or more of a group of individuals making up CIO London management. I also consider (contrary to the view taken in both courts below) that a notice cannot be said to identify an individual merely because persons acquainted with him or his company could do so. Otherwise, it would be necessary in almost every case for a third party notice to be given. The test of identification should have regard to information generally available publicly, without inquiry of those with direct knowledge of the company involved or detailed investigation, to those in the relevant financial world in which the matter occurred. A notice will, in my view, only identify an individual if it does so to persons operating in that world, unacquainted with the particular individual or his company, though familiar with information generally available publicly to operators in that world.
38.
In the present case, the matter to which the Notice related consisted of
the circumstances in which the Bank incurred losses as “the result of what
became known as the ‘London Whale’ trades” (para 2.1), and the Notice assigned
responsibility for this matter in certain respects to “CIO London management”. If
there was publicly available information making clear that CIO London
management equated with Mr Macris
or that he was the person who within CIO
London management had managed the London Whale trades, I would regard that as
sufficient identification of him to trigger section 393(1) and (4).
39.
The courts below relied both on evidence from two witnesses closely
acquainted with Mr Macris
and on the US Senate Report into the “London Whale”
matter. The two witnesses in question had worked with Mr
Macris
in, or done
business with, the CIO and had detailed knowledge of the CIO’s organisation and
structure. They were speaking on the basis of specialist knowledge which was,
in my view, irrelevant to identification. As to the Report, Judge Herrington
said that it “is accessible on the internet and … contains many references to
[Mr
Macris]”
(para 53), and noted that it showed that some of the
communications referred to in the Notice as involving CIO London management
were in fact with Mr
Macris.
In disagreement with Lord Wilson on this point, I
do not consider that it follows that CIO London management equated with Mr
Macris,
or that he was the only relevant individual in CIO London management or
that the criticisms directed generically at CIO London management were being
directed at him. Although it was “accessible on the internet”, I am also left
uncertain whether it and its contents have been shown to constitute publicly
available information in a United Kingdom context.
40. For these reasons, I agree that this appeal should be allowed.
LORD WILSON: (dissenting)
42. In its Notice of Appeal the Authority suggested that, when providing for “third party rights” in section 393 of the Act, Parliament probably intended “an approach which could strike a fair balance between individual reputation and regulatory efficiency”.
43. I indorse the Authority’s suggestion.
44. The court’s decision today does not strike a fair balance.
45. In para 1 of his judgment Lord Sumption observes that the point raised by the appeal “has significant implications for the conduct of the Authority’s investigatory and disciplinary functions”.
46. I agree with Lord Sumption’s observation. But does it not betray a lack of balance? Does the point not also have significant implications for individuals wrongly criticised in warning and decision notices given by the Authority to others?
47. In its Notice of Appeal the Authority stated as follows:
“The issue in the appeal is whether the test formulated by the Court of Appeal is correct. The Authority does not seek to argue (as it did in the Court of Appeal) that identification for these purposes is limited to names or designations that function as proper nouns. But the Authority submits, as it did in the Court of Appeal, that a person is identified in a notice only if the terms of the notice would reasonably lead the ordinary reader (that is, the reader with a general understanding of financial affairs and aware of publicly and widely available background material, but without specific or special knowledge of the underlying facts of the matter to which the notice and its reasons relate) to conclude that the notice unambiguously identifies the applicant as a person mentioned in the notice.”
I will refer to the Authority’s suggested test as the “ordinary reader test”.
48. In its written case, echoed in the oral submissions of Mr Crow QC on its behalf, the Authority suggested that, while the court might wish to consider whether an individual was identified only if named in the notice, or perhaps also if referred to by his formal job title, the “correct test” was its ordinary reader test.
(a) Both in para 11 and in the final paragraph of his judgment (para 17) Lord Sumption stresses the need for a “synonym” before an unnamed person will be identified within the meaning of the section.
(b) In explaining his agreement with Lord Sumption, Lord Neuberger therefore undertakes, at para 26, a conventional analysis of what, in this context, a synonym means. He suggests that the person’s position or office must be mentioned, that he must be the sole holder of it and that, by reference to freely available sources of information, the public must be able easily to discover his name as being the holder of it.
(c) As Lord Mance suggests at para 33, the above may be called a “dictionary approach”.
(d) In para 11, however, Lord Sumption proceeds to explain his use of the word “synonym”.
(e) So he says that a reference to “CIO London management” would be a synonym if it referred to one person who was identifiable from publicly available information. But can “CIO London management” be described as a position or office?
(f) Lord Sumption also says that resort to publicly available information is permissible in order only to interpret, and not to supplement, the language of the notice. How obvious is this distinction?
(g) He also says that it is impermissible to resort to additional facts about the person so that, if they are placed alongside the notice, it becomes apparent that they refer to the same person. How clear is the meaning of this prohibition?
51. In the Upper Tribunal Judge Herrington, who prior to his appointment had been Chair of the Authority’s Regulatory Decisions Committee and so brought to the issue an arresting level of expertise, suggested that the question whether a notice identified an applicant for third party status should be answered in two stages:
(i) By reference only to the terms of the notice, do the matters of which the applicant complains refer to an individual? If so,
(ii) Is there information in the public domain which incontrovertibly demonstrates that the individual is the applicant?
52. The Court of Appeal agreed that the question should be answered in two stages and that the judge’s formulation of the question at the first stage was correct. The Authority says that it now “agrees that a two-stage approach may be helpful … and it broadly agrees with the formulation of the first question”.
53. The Court of Appeal held that the judge’s formulation of the question at the second stage was too broad; and no one now contends otherwise. The Court of Appeal proceeded to reformulate that question as follows, at para 45:
“Are the words used in the ‘matters’ such as would reasonably in the circumstances lead persons acquainted with the [applicant], or who operate in his area of the financial services industry, and therefore would have the requisite specialist knowledge of the relevant circumstances, to believe as at the date of the promulgation of the Notice that he is a person prejudicially affected by matters stated in the reasons contained in the notice?”
54. Unfortunately the Court of Appeal’s mistaken reliance on the law of defamation led it to make two errors in its reformulation of the question at the second stage and to include in it one infelicity.
55. The first error was to include “persons acquainted with the [applicant]” in the notional constituency of those who would decide whether he was the individual to whom the notice referred. Persons acquainted with him would include persons well acquainted with him, such as members of his family and close colleagues at work; and they would be likely to know that he was indeed that individual in circumstances in which it would be absurd to describe him as having been identified in the notice. Thus, in the recent case in the tribunal of Bittar v Financial Conduct Authority [2015] UKUT 602 (TCC), Judge Herrington felt the need, at paras 33 and 34, to apply a heavy gloss to the Court of Appeal’s reference to acquaintances so as to exclude those with close knowledge of the circumstances.
56. The second error was to define the decision for that constituency as being whether the applicant was a person prejudicially affected by matters in the notice. The decision for the constituency is, instead, whether the individual to whom the notice refers is the applicant. Whether, if so, matters in the notice are prejudicial to him is, instead, a matter for the Authority pursuant to section 393(1)(b) and (4)(b) of the Act.
57. The infelicity was to suggest that it was enough for that constituency to “believe”. The verb is too weak. Although the composition of the constituency may not have been correctly identified in its ordinary reader test, the Authority is correct to suggest that, at the second stage, the constituency needs to “conclude” that the individual to whom the notice refers is the applicant.
58. But the kernel of the Court of Appeal’s reformulation of the question at the second stage remains. It is that the relevant conclusion should be reached by “persons … who operate in his area of the financial services industry, and therefore would have the requisite specialist knowledge of the relevant circumstances”.
59. It is at this point that the court should have addressed what is - in my view - the central issue of construction raised by the appeal. Does a notice identify a person for the purpose of section 393(1)(a) and (4)(a) of the Act if ordinary readers, as defined by the Authority in its suggested test, would conclude that the individual to whom the notice refers is the applicant? Or does it identify a person for that purpose if ordinary operators in the same sector of the market would reach that conclusion? Which, in other words, is the appropriate constituency - ordinary readers or ordinary market operators?
61.
Take the case of Mr Macris
himself. In the warning and decision notices
given to the bank on 18 September 2013, the Authority referred in detail to a
telephone call on 10 April 2012 which it had conducted with “CIO London
management”. In fact it had conducted the call with (or primarily with) Mr
Macris;
and in these proceedings it has always accepted that, when referring in
the notices to “CIO London management”, it was referring to Mr
Macris
but in a
way which (so it hoped) would avoid identifying him. In the notices the
Authority concluded in relation to the telephone call “that (by virtue of the
conduct of CIO London management) the Authority was deliberately misled by the
Firm”. The allegation that during the telephone call Mr
Macris
deliberately
misled the Authority is, if untrue, gravely damaging to him. But, in its later
notices given to Mr
Macris
himself following its direct inquiry into his
conduct, there is no such allegation. There is extensive reference to the same
telephone call; and his conduct in the course of it is said to contribute to
the conclusion that, as an approved person, he had failed to deal with the
Authority in an open and cooperative way in breach of Statement of Principle 4
of the Authority’s Statements of Principle for Approved Persons. But the more
gravely damaging allegation against Mr
Macris
is not repeated. Yet, by
contrast, there, in the published decision notice given to the bank, the
allegation remains. Apparently Mr
Macris,
whose employment by the bank has long
since been terminated, cannot challenge it in any way. He cannot sue the
Authority for damages, whether in tort or otherwise, because it has not acted
in bad faith: paragraph 25 of Schedule 1ZA to the Act. And, by the decision of
the court today, he is not entitled to third party status under section 393 of
the Act.
62.
Nor would Mr Macris
have been entitled to third party status by
application of the Authority’s ordinary reader test. I see no merit in the
Authority’s submission that, even if ordinary market operators were to conclude
that he was the individual to whom the decision notice referred, Mr
Macris
should fail to secure third party status because ordinary readers would not
reach a similar conclusion.
63. In my view the proper construction of the word “identifies” in section 393(1)(a) and (4)(a) of the Act requires that the question at the second stage of the inquiry should be answered by reference to the ordinary market operator test. But the test requires expansion in order to identify, and in particular to limit, the information to which the operator should refer. In essential agreement with Lord Mance at para 37, I would expand it as follows:
“Are the words in the notice such as would reasonably lead an operator in the same sector of the market who is not personally acquainted with the applicant, by reference only to information in the public domain to which he would have ready access, to conclude that the individual referred to in the notice is the applicant?”
64. It is easy to pick holes in my formulation of the above question. In their application to particular facts, its references to the same sector, to personal acquaintanceship and to ready access to information might all give rise to debate. But, for my part, I am unpersuaded that it would be impossible for the Authority satisfactorily to address that question; for it will not have reached the stage of giving a notice before having conducted a profound examination of the relevant circumstances.
65. Above all, however, my formulation would, if I may say so, have better struck, as between individual reputation and regulatory efficiency, the fair balance which the Authority has correctly identified to have been Parliament’s intention.
66.
Were I correctly to have
formulated the question at the second stage of the inquiry, the answer to it
would be “yes, the individual referred to in the notices is Mr Macris”.
There
is no doubt that the two deponents in support of Mr
Macris,
each of whom knew
him and had worked with him, could not have contributed to an affirmative
answer. But there was also the report of the US Senate Permanent Subcommittee
on Investigations dated 15 March 2013 and entitled “JP Morgan Chase Whale
Trades: A Case History of Derivatives Risks and Abuses”. As Judge Herrington
said, the report was the subject of an in-depth investigation; was readily
accessible on the subcommittee’s website; and contained many (in fact more than
80) references to Mr
Macris.
It had generated significant press attention. By
cross-reference to the report, the ordinary market operator would readily
conclude that the references in the notices to “CIO London management” were
references to Mr
Macris.
When, for example, the notices referred to the
despatch by “CIO London management” of an e-mail on 30 March 2012, the
subcommittee report referred to its despatch by “Achilles
Macris”.
I do not
share the concern of Lord Mance, expressed at para 39, that the report might
not have been readily available to market operators in the UK; and I agree with
the qualified acknowledgement by Lord Neuberger, at para 30, that it would
provide an affirmative answer to my formulation of the question.
67.
Nor do I join my colleagues in
concluding that Mr Macris
fails even to pass the first stage of the inquiry,
which requires him to establish that, by reference only to the terms of the
notices, the Authority’s criticisms of “CIO London management” refer to an
individual. The Authority secured permission from the Court of Appeal to
challenge the tribunal’s conclusion that Mr
Macris
had passed the first stage;
but its challenge failed. In its Grounds of Appeal to this court there was no
suggestion of any aspiration to mount a further challenge in this respect.
Indeed in my view, had permission to do so been sought, it would have been
refused; it does not raise a point of general public importance. I consider
that, although good arguments relevant to the inquiry at the first stage have
run both ways, it is no longer open to the Authority to dispute the passage of
Mr
Macris through it.
68. So I would have dismissed the appeal.