The U.K. Financial Conduct Authority has decided it’s time to start naming names.
The agency is planning to run shorter investigations and reach conclusions on individuals and their employers concurrently, allowing it for the first time to identify traders by name in company-penalty notices, enforcement head Mark Steward said in a telephone interview with Bloomberg Monday.
The FCA has traditionally used nicknames such as “Trader A” in reports to get around a requirement a person must be given the chance to respond to allegations if they’re identified. That eased the way for companies to reach settlements quickly, but left accused employees unable to respond to allegations they said clearly identified them.
“There should be less need for individuals to be referenced with synonyms and alphabetical proxies: we should be able to name people” in penalty notices, Steward told Bloomberg. “Where there are concurrent firm and individual liability issues, we should be aiming to deal with those in the round at the same time.”
The change in approach on so-called third-party rights comes despite a surprise victory for the FCA on the issue in a landmark court ruling last week.
The U.K. Supreme Court said Wednesday the regulator didn’t identify former JPMorgan Chase & Co. executive Achilles Macris in a sanction notice related to the so-called London Whale scandal, setting an important precedent on the matter. Traders with similar suits have 21 days from the ruling to decide whether to pursue their complaints.
“Individuals will be disappointed with the Macris ruling,” said Guy Wilkes, a London lawyer and former FCA enforcement head. But Steward’s change in approach will “give individuals more leverage as participants in any multi-party settlement negotiation.”
Despite the FCA’s success, Steward said he was “sympathetic” to complaints made by defense lawyers about the position of individuals.
My objective “is to avoid third-party rights, not through the use of acronyms and alphabetical proxies, but by ensuring that if we’re saying someone has done something wrong we should do so through a proper process,” he said. “Investigations should be shorter and proceedings” should take as long as necessary.
The FCA’s record under the previous approach was mixed prior to the top court’s ruling.
A court ruled last year Barclays Plc’s ex-global FX head of voice spot trading, Chris Ashton, wasn’t identified in penalty notices with the bank and his former employer UBS Group AG. Ashton, along with ex-Deutsche Bank AG Libor trader Joerg Vogt who also lost his claim, must decide whether to appeal. Former Barclays trader Philippe Moryoussef also has a claim outstanding.
Other bankers who must decide whether to pursue their claims in the next three weeks are JPMorgan’s former London chief currency dealer, Richard Usher, and Citigroup Inc.’s former head of G-10 spot currency trading, Rohan Ramchandani. The men say they were improperly identified in multi-million pound settlements for attempts to manipulate the currency market.
Lawyers for the men either declined to comment or didn’t respond to a request for comment.
For some, the decision lies in the FCA’s hands. Ex-Deutsche Bank trader Christian Bittar won a judgment in 2015 that he was identifiable in the German lender’s 2015 settlement over interest-rate benchmark rigging and it’s up to the agency whether to appeal. Steward declined to comment on any appeal, as did Bittar’s lawyer.
In the case of Macris, JPMorgan was fined more than $1 billionby U.S. and U.K. regulators in 2013 after a trader nicknamed the London Whale incurred $6.2 billion in losses. The FCA referred in its penalty notice throughout to faults made by “CIO London management,” a label Macris contended easily identified him because he was responsible for JPMorgan’s chief investment office in Europe and was based in London.
Supreme Court Judge Jonathan Sumption said the moniker wasn’t “sufficiently precise” to identify Macris. The court said the person must be identifiable by the public at large, not just a select group of banking peers. These conditions create a high hurdle for individuals.
If “this does herald a change in strategic direction by enforcement, it will no doubt be welcomed by individuals who would then have a fighting chance in challenging” conclusions before they’re public, said Catherine Robinson, a lawyer at Byrne & Partners, who successfully defended “London Whale” Bruno Iksil against FCA action. “As with any mooted policy, the proof will be in the pudding.”
Nevertheless the industry will welcome the fact that Steward, who took up the FCA post 18 months ago, is looking for ways to better balance the interests of all parties.
“Agreed resolutions are important and being able to achieve agreed resolutions quickly is an important part of public policy,” Steward said. “There can be no shortcut to fairness.”