Following major trading losses, the Financial Conduct Authority issued notices recording failings by the bank. The notices criticised “CIO London management” without naming Mr Macris. The question was whether that description identified him for the purpose of section 393 of the Financial Services and Markets Act 2000 and entitled him to the protections it gave third parties.
The notices and the complaint
Mr Macris was the Bank’s International Chief Investment Officer and head of its London Chief Investment Office, which managed a portfolio called the Synthetic Credit Portfolio. His functions were “controlled functions”, so he needed the Authority’s approval. In 2012 the Bank announced that the portfolio had lost $5.8 billion in the first half of the year, a figure which rose to $6.2 billion by the year end. The Authority concluded that the losses resulted from a high-risk trading strategy, weak management, an inadequate response to important information, and the withholding of significant information from the Authority. A settlement was agreed under which the Bank paid a penalty of £137,610,000.
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The Act provides for a warning notice, a decision notice and a final notice. All three were served on the Bank on 18 September 2013, and the decision and final notices were published the next day. They did not name Mr Macris or state his job title, but they often referred to “CIO London management”. The Authority accepted that, if those words identified him, the notices were prejudicial to him. He was not given a copy or an opportunity to answer them. He was separately under investigation and was not party to the Bank’s settlement. On 9 February 2016 the Authority published a final notice about him personally, recording that he had been party to the withholding of information and had once misled the Authority, and imposing a penalty of £762,900.
Section 393 protects a “third party” where reasons in a warning or decision notice identify someone other than the recipient and, in the regulator’s opinion, are prejudicial to that person. The third party must receive a copy, so as to make representations and, after a decision notice, to refer the matter to the Upper Tribunal. The Upper Tribunal tried as a preliminary issue whether Mr Macris had that status. Judge Herrington held that he did. The Court of Appeal agreed in the result.
Why the lower courts treated him as identified
Judge Herrington read the notice’s account of reporting lines, from the traders through “SCP management” to “CIO London management” and then to New York, as describing individuals rather than collective bodies. References to conversations, meetings and emails strengthened that reading. He then used outside material to connect the description with Mr Macris: unchallenged evidence from a former colleague and from a salesperson at another bank, and a United States Senate committee report, available on the internet, which named Mr Macris and described his role.
Gloster LJ, with whom Patten LJ agreed and with whom Longmore LJ agreed so far as the question was one of law, did not adopt all of that reasoning. She held that the references were to an individual ascertained from the notice alone. She also held that people acquainted with Mr Macris, or working in his area of financial services, could reasonably have identified him, including by reading the Senate report with the notices. She took that audience from the law of defamation, where words may refer to a claimant if reasonable people with special knowledge would so understand them.
The majority’s narrower reading
Lord Sumption, with whom Lord Neuberger and Lord Hodge agreed, said that the meaning of “identifies” and the meaning of the notice are both questions of law, although background facts may inform them. The real issue was which facts may be used.
A person is identified if named, or described by a synonym such as an office or job title. The notice itself must show that a synonym could apply to only one person, and that person must be identifiable from the notice or from public information used to interpret its language rather than to add to it. Discovering from a company’s website who its “chief executive” is can interpret the notice. It is not permissible to place extra facts about someone beside the notice until both plainly concern the same person.
Lord Sumption gave several reasons. Section 393 occupies some of the ground of the public-law duty to allow representations, but it does so more narrowly and defines what fairness requires for these notices. It is the reasons in the notice, not an outside source, that must identify the person. Different parties to one investigation may receive notices at different times, and one may settle first. Once criticism of that party is established, there may be no proper reason to withhold it from the market, yet insiders or internet searches may still reveal who a phrase such as “management” means. The Authority will not necessarily know what outsiders can discover, so it must be able to avoid identification by how it drafts the notice. If the Senate report counted, the Authority could not have served the Bank’s settlement notice without copying it to Mr Macris at a comparatively early stage of the investigation into him. Publication serves the public at large, for transparency and deterrence, not a specialist group with extra knowledge. Defamation is a poor analogy: liability there can arise even if the publisher did not intend the words to refer to the claimant, whereas section 393 applies only where the Authority actually identifies someone it knows and means to refer to.
He rejected the argument that reporting lines, or acts such as sending an email, show that “management” must mean one individual rather than any of several people within the firm, CIO or CIO management. The notice alone would not have told a reasonable member of the public, without outside information, that any of those expressions was a synonym for Mr Macris.
Lord Neuberger agreed, while recognising the case for a wider meaning. A firm may want to pay a penalty and limit publicity, whereas an employee may need the Tribunal to protect his reputation and future employment. He noted that, on Mr Macris’s own later notice, some allegations were upheld but more serious ones, including one implying a lack of honesty, were rejected. Without identification in the Bank’s notice, Mr Macris could not have challenged that notice unless he had received a notice of his own. Even so, the statute asks whether the notice identifies the person, not whether readers can make him identifiable. A sole office-holder whose name the public could easily discover is identified; jigsaw identification is not. A member of the public would neither know of the Senate report nor think of using it for this purpose.
A wider test, but the same result; and a dissent
Lord Mance thought the majority too narrow, although a right triggered by anything a future employer might uncover would make the Authority’s task unworkable and went beyond the Act. For him, identity must be apparent from the notice read with information generally available to people in the relevant financial world, not information known only to acquaintances of the person or firm. The two witnesses spoke from specialist knowledge which did not count. He was not satisfied that the Senate report showed that “CIO London management” meant Mr Macris alone, or that it had been shown to be publicly available information in a United Kingdom context. On that test, he still agreed that the appeal should be allowed.
Lord Wilson dissented. He considered that wrongful criticism is most damaging through the reaction of operators in the same market sector, who may affect a person’s employment. He would have asked whether the words would reasonably lead such an operator, not personally acquainted with the applicant and using only public information readily accessible to that operator, to conclude that the applicant was the person referred to. The Senate report, readily accessible and widely noticed, would on that test have identified Mr Macris. He would have dismissed the appeal, and he also considered that the Authority could no longer dispute the conclusion that the notices referred to an individual.
Verdict: By four votes to one, the Court allowed the FCA’s appeal. Its notices did not identify Mr Macris for the purposes of section 393. The Court decided his entitlement to the statutory procedure and made no finding about the underlying criticisms.
