The eagerly awaited Supreme Court judgment in the case of Achilles Macris has now been handed down. Whilst the regulators may well be happy about the outcome, the judgment is proving somewhat controversial in the enforcement community.
In broad summary, under FSMA, where a relevant regulatory Notice is given to one party, but which identifies and prejudices a third party, that third party has the right to make representations on it. The Macris case involved a Notice that had been agreed by JPMorgan Chase in relation to the London Whale trades. There were various references in the Notice to "CIO London Management" and similar expressions. The FCA agreed that these were in reality references to Macris. If they identified Macris, the FCA also agreed that they were prejudicial. The issue in this case then was whether Macris had in fact been identified according to the meaning of the relevant statute and therefore whether he ought to have had the right to make representations on it. Central to that issue was what evidence outside the Notice could be looked at in order to decide whether a person was identified.
The Upper Tribunal and Court of Appeal both found that Macris had been identified within the meaning of the statute. In a split decision, however, the Supreme Court found that he had not been identified. In the leading judgment, Lord Sumption essentially described the test for identification as being whether a person had been identified by name or by a synonym for him in the Notice, such as his office or job title. In the case of a synonym, the person had to be identifiable from information either in the Notice or from publicly available information elsewhere. Crucially, resort to information publicly available elsewhere was held only to be permissible where it enabled one to "interpret (as opposed to supplementing) the language of the Notice".
The principle to be decided by the Court was a very important one. There are a variety of interesting aspects of the judgment, although not without controversy.
- The precise scope of what the Supreme Court has decided is difficult to pin down. For example, it is not clear precisely where the limits are in being able to resort to publicly available information to interpret the Notice, as opposed to supplementing it.
- A widely-drawn test could have caused problems for the regulators in preparing Notices. For example, if resort had been permitted to what was known by knowledgeable insiders or to what could be discerned from all public sources, the regulators would no doubt have found it very difficult to know whether third party rights should be given in any particular case. In the event, the Supreme Court adopted a narrow test, narrower even than the FCA had argued for.
- The narrower the test, the more likely it is that third parties will be harmed without any recourse. This judgment has arguably pushed the dial too far away from the rights of third parties. A third party might accordingly find that, even though not identified according to the statutory test, market participants will nevertheless know that it is that third party who is being referred to. For individuals especially, given that their reputations and future job prospects may be at stake, it is market participants and peers that they will probably care about the most.
- This problem may be particularly acute in light of certain interests both of employers and of regulators. Employers will often want to settle cases and move on. This judgment allows them to do that, whilst at the same time pointing the finger at individuals without necessarily "identifying" them under the statute. This could prove of benefit also to the regulators as it would allow them to send messages to the industry with a great deal of particularity, but without having to give third party rights.
- One likely outcome achieved by the narrowness of the decision is that there will be less scope for disputes on whether third parties have been identified under the statute. There are a large number of cases currently backed up on third party rights, and these may well now have to be abandoned.