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The UK’s financial watchdog has won a landmark judgment following a protracted legal battle brought by the manager of the so-called “London Whale” at the centre of huge losses at JPMorgan Chase five years ago.
The decision in favour of the Financial Conduct Authority by the Supreme Court on Wednesday came after the FCA appealed earlier rulings that it improperly identified Achilles Macris in its public notice accompanying a £138m fine levied on JPMorgan in 2013 for the $6bn black hole.
Mr Macris, who at the time was chief investment officer of the synthetic credit portfolio team at JPMorgan, managed Bruno Iksil, dubbed the Whale for his outsize derivatives position. In the FCA’s notice against JPMorgan, Mr Macris was identified as “CIO London management”.
The Supreme Court on Wednesday said this was not enough to identify him and therefore engage his so-called third party rights.
FCA notices against companies are meant to keep confidential the identities of individuals so as not to prejudice any action against them personally. If the watchdog does identify them in any way, it is meant to give them a chance to put across their side of the story and give them access to evidence it relies on. These are third-party rights.
But even though individuals are described using monikers such as Trader A or Manager B, the media can often identify them through piecing together parallel investigation reports from other countries or information already in the public domain.
Wednesday’s decision – the final judgment on the matter – means that the FCA can avoid overhauling its approach to how it conducts investigations and presents its findings. It previously warned that a ruling against it would have the effect of drawing out already lengthy investigations – which on average can take 62 months in contested cases.
It was a test case for a handful of other similar actions brought by traders caught up in the benchmark-rigging probes of Libor and foreign exchange.
In addition to the case against JPMorgan, Athens-based Mr Macris was banned and fined last year for failing to inform the FCA about concerns over the credit derivatives division he headed. The regulator said there was no deliberate dishonesty on the part of Mr Macris.
The FCA’s case against Mr Iksil, however, collapsed when an internal FCA panel found that the enforcement team had not sufficiently made out its case against him.