The fallout from the London Whale affair was, by any standards, substantial for JP Morgan-losses of USD 6.2billion and a USD 920million fine from the US Securities and Exchange Commission (‘SEC’). For the individuals involved in the loss-making transactions, however,  the eventual fallout is still unknown, as prosecutions trundle on in courts in both the US and Europe.

Against this backdrop, it might have been assumed that Julien Grout would have been relieved when the Financial Conduct Authority (‘the FCA’) decided to terminate its investigation into his conduct in connection with the London Whale affair. Grout, however, responded by applying for judicial review of the FCA’s decision, seeking to reinstate the investigation.


Grout worked in a London-based division of JP Morgan known as the UK-based Chief Investment Office (‘CIO’). As well as being a junior trader, Grout was also the assistant to Bruno Iksil, the individual with primary responsibility for trading the portfolio that generated the London Whale losses (‘the Portfolio’) in July 2012. Grout was responsible for producing the daily reports which showed the value of the Portfolio against the market.

In August 2012, the FCA appointed investigators to investigate whether Grout had breached his obligations as an ‘approved person’ and to establish whether he had been knowingly concerned in any breach of applicable

rules by JP Morgan. Investigators were also simultaneously appointed to investigate JP Morgan itself and other individuals who had been responsible for the Portfolio, including Iksil and the CIO’s senior management, Achilles Macris and Javier Martin-Artajo. Grout resigned from JP Morgan in December 2012 and returned to France, his home country, in July 2013.

Thereafter, in September 2013, the FCA published a Final Notice which, amongst other things, found that there was deliberate mis-marking by the traders, at the direction

of senior management, to conceal the Portfolio’s losses. Grout, when interviewed by the FCA, contended that Iksil set the value of the trades and that he had simply done as Iksil told him, not knowing that there was anything wrong with such a course of action. In the Final Notice, which Grout was not given the opportunity to comment upon, the FCA rejected material parts of Grout’s account.

Notwithstanding its findings, the FCA subsequently decided to terminate its investigation into Grout (‘the Decision’), on the basis that:

Grout was the subject of criminal proceedings taking place outside of the UK. In this regard, the SEC had brought a civil action against Grout and Martin-Artajo in August 2013, and in September 2013, the two were indicted by a federal grand jury. The charges were conspiracy, falsifying the books and records of JP Morgan and causing false statements to be made in JP Morgan’s SEC filings

Grout no longer worked, and was unlikely to work again, in the UK financial services industry and In light of the first two factors, it was not appropriate to allocate substantial resources to an investigation into Grout’s conduct

However, the FCA continued its investigations into Macris and Iksil (who were not the subject of criminal proceedings in the US, Iksil in particular having been granted  immunity from the prosecution in return for agreeing to  be a witness).

Judicial Review

Grout issued judicial review proceedings, arguing that the Decision was irrational because:

  • the FCA was treating him differently to Macris and Iksil, individuals in the same position as him
  • the FCA placed too much weight on the US criminal proceedings and this affected him unfairly
  • the FCA was continuing to devote resources to investigating Macris and Iksil

In dismissing the action, the High Court held that Grout was not in the same position as Macris and Iksil. His position was not even materially similar. Unlike Grout, Macris and Iksil were not subject to criminal proceedings in the US. Further, Macris and Iksil were senior figures at JP Morgan and it was legitimate for the FCA to cease investigating Grout, who was only a junior trader. The Court also found that the FCA had not given manifestly disproportionate weight to the US criminal proceedings and, ultimately, it was a matter for the FCA to determine how it allocated its resources. Accordingly, the Decision was within the bounds of reasonable decision-making.

Finally, the Court concluded that the Decision could not be characterised as unfair because (in Grout’s opinion) it prevented Grout from clearing his name. Grout could still clear his name in the US criminal proceedings. Further,  it was difficult to see how the FCA could be required to continue to devote considerable public resources into an investigation in order to establish that there was no misconduct.


This case’s most remarkable factor is, perhaps, the fact that it was brought at all as one would assume that the usual response of the subject of a regulatory investigation to its discontinuance would be one of relief. However, some sympathy must be afforded to Mr Grout and this case is demonstrative of the collateral damage (often reputational) which can be suffered by individuals when corporate entities enter into regulatory settlements to which they are not party.

Although the courts are entitled to hold that any particular decision of a public body is irrational (i.e. so unreasonable that no reasonable person, applying his mind to the situation, could have arrived at it), the courts have only held decisions of public bodies to be so where that body  has acted in excess of the powers conferred upon it by Parliament; breached the principles of natural justice

in reaching its decision; or taken irrelevant factors into account. These three areas present high thresholds for any prospective judicial review applicant to satisfy.

Exemption from UK Jackson Reforms for Insolvency Practitioners extended

In February, the government announced that the present exemption to the provisions of the Legal Aid, Sentencing and Punishment of Offenders Act (LASPO) which allows Insolvency Practitioners to continue to recover CFA uplifts and ATE premiums in successful litigation has been extended. It had been due to expire in April. This means that claims against, for example, directors by insolvency practitioners can continue to be brought on a no-win no-fee basis. No new end date has been set for the exemption, but the Government indicated that it would be reviewed later in the year.