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06 Apr 2017

Chris Dyke’s article on the lack of clarity in the case of Macris published in Thomson Reuters

When, on 22 March 2017, the Supreme Court handed down its long awaited judgment in the case of FCA v Macris, it ultimately created more nuance and not much clarity.

The FCA is required by law to issue a warning, decision and final notice to a firm or person under investigation for regulatory breaches. The FCA is not required to publicise a warning notice, but it is required to publish its decision and final notices. Notices regarding action proposed to be taken against a firm will almost certainly contain implicit or explicit criticisms of individuals who are not the subject of the notice. Those individuals are referred to in law as “third parties”.

Public criticism can have a profound adverse impact upon third parties if they are capable of being publicly identified from information contained in these notices. Their reputation, and therefore their future employment prospects, could be harmed. Third parties are protected against this sort of unfair prejudice by being given the opportunity to make representations to the FCA about publication of the notice and the FCA’s findings if they are “identified” in the notice and that notice is “prejudicial” to them.

The FCA’s appeal to the Supreme Court in the case of Macris concerned the circumstances in which a third party was considered to have been “identified” in a notice. In handing down the leading judgment, Lord Sumption held that the term “CIO London Management” in the notice issued by the FCA to Mr Macris’ former employer, JP Morgan Chase, did not identify him. Albeit disappointing news for Mr Macris, what clarity does this decision give to others who consider that they may be prejudiced by a notice issued by the FCA?

The clarity

This judgment makes it clear that a person will not be considered to have been “identified” in a notice issued by the FCA unless the information contained within the notice enables the public at large to identify him/her. The fact that people within the financial services industry have access to information which is capable of identifying the third party is immaterial if this information is not readily accessible to the man on the Clapham omnibus.

The battleground

In providing this ‘clarity’, there are three questions arising from the “identification” test articulated by the Supreme Court which will continue to provide grounds for individuals to assert their third party rights in future cases.

What is a synonym?

Lord Sumption stated that “a person is identified in a notice…if he is identified by name or by a synonym for him[Emphasis added]”

In this particular case, Lord Sumption explained that the term “CIO London Management” could have been considered a synonym for Mr Macris, if it referred to one person who was identifiable from publicly available information.  On the facts of the case, the Supreme Court held that it did not.  However, this approach shows that a synonym is not limited to references of the position or office of an individual. It is potentially much wider and, on different facts, in a different case, the terms of reference used by the FCA in a notice may easily be capable of identifying an individual from publicly available information. For example, references to a function, location of work, a public statement or nickname synonymous with a particular individual.

What information is accessible to the public at large?

In the internet age, the nature and scope of the information available at the fingertips of all members of the public is vast. The Court of Appeal, in finding that Mr Macris had been identified, relied on a US Senate Report which identified him by name. Although this document was available on the internet, the Supreme Court concluded that this was not information which was available to the public at large.

If an inquisitive member of the public were to discover the identity of individuals implicitly criticised in an FCA notice as a result of internet research, when would that research be deemed to have gone beyond the point of accessing information available to the public at large? The answer to this question is not provided by the Supreme Court.

What is the distinction between “interpreting” and “supplementing”?

Lord Sumption added that a third party is not identifiable from a synonym if it is necessary to have regard to information outside of the notice, unless that information is used only to “interpret (as opposed to supplementing) the language of the notice”.  Lord Sumption expressly prohibited the use of “additional facts” which “when placed side by side” with a notice makes it possible to identify that they refer to the same person.

In his dissenting judgment, Lord Mance noted that this distinction between interpreting and supplementing the contents of a notice is not obvious. When would the inquisitive member of the public’s internet research be deemed to supplement the notice, rather than interpret it? The answer to this question will rarely be clear and it is therefore a hugely significant area for future litigation.

The future

Other than to clarify that the relevant audience when considering whether a third party has been identified by a notice is the public at large, rather than an ordinary market operator, the decision reached by the Supreme Court in Macris is founded on the specific facts in that case.

There therefore remains significant uncertainty surrounding how the courts will identify and interpret synonyms, and apply publicly available information to the facts of different cases of this nature in the future. In spite of this judgment, individuals continue to have significant grounds on which to argue that they have been identified in a notice published by the FCA even where they are not identified by name or by role – leaving the door ajar for more cases of this nature to be disputed in future.

This article was originally published in Thomson Reuters Regulatory Intelligence and can be accessed here, behind a paywall.

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