On 22 March 2017 the Supreme Court handed down its judgment in the final stage of the long running case concerning whether a third party was "identified" for the purposes of section 393 of the Financial Services and Markets Act 2000 ("FSMA") in enforcement notices issued by the Financial Conduct Authority ("FCA"). This is important because that section is designed to give third parties certain rights relating to warning and decision notices given to another person or entity in respect of which the FCA is taking regulatory action. The Supreme Court found that the FCA did not wrongly identify Achilles Macris, a former JP Morgan executive, when it issued public notices at the same time as imposing a multi-million pound fine on the bank in 2013. This decision overturned those of the Upper Tribunal and the Court of Appeal, handing victory to the FCA and introducing renewed concern for regulated individuals, particularly senior managers. Indeed, some may question whether the competing interests of regulatory efficacy and individual interest have been fairly balanced by this decision.

The Facts

In 2012 Mr Macris was the International Chief Investment Officer of JP Morgan Chase Bank NA (the "Bank") and, in that capacity, head of the Bank's Chief Investment Office ("CIO International"). Part of CIO International's function was to manage a portfolio of traded credit instruments called the Synthetic Credit Portfolio. Over the course of 2012 the Synthetic Credit Portfolio suffered losses of USD 6.2 billion due to what later became known as the "London Whale" trades and, following an investigation, the FCA concluded there were failings on the part of the Bank and agreed a regulatory settlement with the Bank in the sum of £137.6 million. The FCA set out its findings in three notices (the warning notice, the decision notice and the final notice) issued to the Bank, with only the final notice being published.

The provisions of FSMA governing the imposition of penalties require three successive notices to be given to a person or firm under investigation, which include reasons for the FCA's actions. In accordance with the usual procedure where a regulatory settlement is agreed before service of these notices, all three were drafted in identical terms and served on the Bank simultaneously. Pursuant to section 393, if any of the reasons contained in a notice "identifies" a person other than the person to whom notice is given, and is prejudicial to that person, they must be given a copy of the notice to enable them to make representations to the FCA and refer the matter to the Upper Tribunal if they so wish, before the FCA's findings are made public.

The notices did not identify Mr Macris by name or job title, but there were numerous references to, and certain adverse findings against, "CIO London management". Mr Macris was not the only manager in CIO International in London but his case was that those who were active in the relevant markets would have known that it referred to him. In addition, Mr Macris relied on the fact that shortly before 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 incurring and treating these losses, identifying him by name. It was argued that, read alongside the notices, the Report would enable anyone to easily deduce who was being referred to as "CIO London management".

However, Mr Macris was not supplied with a copy of the notices, and so denied the opportunity to make representations as to their content.

Upper Tribunal & Court of Appeal Decisons

Shortly after the publication of the final notice, Mr Macris made a reference to the Upper Tribunal, asserting that the FCA should have given him the right to make representations on certain matters set out in the final notice. The Upper Tribunal decided that Mr Macris was identified as any reader of the final notice with relevant experience would understand the references to "CIO London management" to refer to Mr Macris. Thus, he was entitled to third party rights under section 393.

The FCA appealed, but while the Court of Appeal upheld the decision of the Upper Tribunal, it based its reasoning, in part, on an analogy with the law of defamation, setting out a two stage test. First, can the person be identified or specified from the terms of the notice alone, even though they are not named. Second, would the notice reasonably in the circumstances lead persons acquainted with the third party or who operate in his area of the financial services industry to believe that the third party is a person prejudicially affected by matters stated in the reasons contained in the notice. The Court of Appeal concluded that persons who operated in Mr Macris' field would reasonably have been able to identify him from statements made in the notice, together with publically available material.

Supreme Court Judgment

The question at issue on appeal was whether the notices in question did in fact identify Mr Macris. The judges acknowledged that the issue was difficult to resolve.

By a majority of four to one the Supreme Court allowed the FCA's appeal. Lord Sumption (with whom Lord Neuberger and Lord Hodge agreed) gave the leading judgment, holding that a person is "identified" for the purposes of 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 publically available elsewhere." However, reference can only be made to such public information where it enables the reader to interpret (rather than supplement) the language of the notice.

Lord Sumption based his narrower formulation of the test on five reasons, including the language of section 393 (which clearly requires that it is the reasons contained in the notice which must identify the third party and not some extrinsic source), and that section 393 must be read in light of the practicalities of performing the FCA's investigatory and disciplinary functions. The FCA will not necessarily know what information is available to the public. In those cases, the FCA must be able to ensure that a third party is not identified in the notice, even if that person is identifiable from information elsewhere. Lord Sumption found that the suggested analogy with the law of defamation was unhelpful as section 393 has a different purpose.

Lord Sumption determined that the real question was whether the terms of the notice itself would have conveyed to a reasonable member of the public, without extrinsic information, that any of the terms in the notice were a synonym for Mr Macris. He answered that question in the negative, therefore Mr Macris was not a third party for the purposes of section 393.

Lord Neuberger concurred, finding that any investigation process into publically available information should not require any detective work or be as a result of "jigsaw identification", and noting that it would otherwise be a matter of subjective assessment as to how wide a scope to give to section 393, and would place the FCA in difficulties.

Lord Wilson gave a dissenting judgment. He considered that the majority's approach did not strike a fair balance between an individual reputation and regulatory efficiency which was the intention of section 393. Lord Wilson considered that the central issue is the appropriate constituency – ordinary readers or ordinary market operators? He answered the question by reference to the particular sort of damage which a wrongful criticism of an individual given in a notice is likely to cause for him, finding that the appropriate constituency is those who operate in the same sector of the market, as the notice may prejudice the third party's ability to remain in or find employment in that sector. He found that the second stage of the test should be whether the words in the notice would reasonably lead an operator in the same sector of the market, not personally acquainted with the third party, 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.


Lord Neuberger acknowledged that the issue had significant implications for the conduct of the FCA's functions and for individuals who may have their reputation and career harmed by the publication of a notice. A decision adverse to the FCA could have forced it to change the way in which it conducts investigations and settles enforcement cases with financial institutions. The Supreme Court's judgment imposes no restriction on the FCA's ability to reach speedy settlements with regulated entities, although no doubt the FCA will take care to ensure that no individuals can be identified in future enforcement notices in any event.

The decision is undoubtedly a concerning development from the perspective of regulated individuals, and more particularly D&Os and senior managers who are already the focus of the senior managers regime ("SMR") and those who will soon be subject to the senior insurance managers' regime ("SIMR"). It is generally accepted that the SMR and SIMR will mean an increased focus on the actions (or inactions) of senior management in the context of enforcement investigations against corporates, and likely an increase in enforcement actions against senior managers themselves. The implication of this is that there could well be a more detailed focus on the actions of individuals in regulatory notices against corporates, but the Supreme Court's narrow interpretation of "identification" means that, depending on the language of the notice, the individual may well be denied third party rights under section 393.

It is hoped that, despite the Supreme Court's decision, the FCA will nonetheless exercise great care and fairness when considering the application of section 393 given the potentially detrimental impact on individual's reputation and livelihoods.