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FCA faces nine lawsuits over ruling on identification

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The FCA is facing nine lawsuits for improperly identifying traders in penalty notices, which could lead to a possible change in rules on UK enforcement proceedings.

Bloomberg reports the FCA faced a first hearing from more than 20 lawyers last week on the reputational damage their clients suffered as the regulator failed to disguise them in bank settlement reports.

The news comes after the FCA lost a landmark appeal a month ago when a judge said it failed to properly hide the identity of former JPMorgan Chase manager Achilles Macris on the so-called London Whale case in its settlement with the bank.

Macris argued that the regulator improperly identified him when it fined JPMorgan £138m over the settlement, in which the bank lost $6bn on derivative positions taken by one of its traders.

When publishing settlement notes the FCA is meant to keep individuals anonymous to avoid legal prejudice in possible future cases against them. The regulator is also meant to give that person a right to make representations before findings are published.

“Part of deterrence is telling the story and if you’re telling it with one hand behind your back, because you can’t allude to individuals, it will make things difficult,” FCA chief executive officer Martin Wheatley told Bloomberg.

If the FCA fails to win an appeal to the Supreme Court on the Macris case, it would decide to take years to complete investigations on financial firms giving all parties the chance to participate. It could also choose to publish settlements that won’t fully explain the misconduct.


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There are 18 comments at the moment, we would love to hear your opinion too.

  1. Yet more indisputable proof of how useless this organisation is , not fit for purpose

  2. So, we develop a ‘suspicion’ about a client’s declarations and are expected to ‘blow the whistle’ without divulging our action? How does that fit with “Part of deterrence is telling the story and if you’re telling it with one hand behind your back, because you can’t allude to individuals, it will make things difficult”
    What we ‘suspect’ & subsequently act on may be something that a client has a perfectly valid answer for, no?

  3. useless cretins, can’t get anything right

  4. Perhaps this is a factor contributing to the increase in fees?

  5. Where will the legal defence cost come from, Mr Wheatley? To plagiarise a well known phrase, I’ve had a look at the Financial Advisers coffers & ‘I’m afraid there’s no money left-good luck’

  6. NO here is a good reason to use fines to pay for the legal fees and any payments that the FCA is called upon to make. Try arguing against that! Well I guess it’s easier taking it from adviser pockets.

  7. Jonathan Purle 23rd June 2015 at 6:37 pm

    Believe me – This could prove to be funnier than people might currently imagine. The FCA has really dropped the ball here.

  8. If the FCA get fined, where does the money go and do we pay for it anyway?

  9. Anthony Badaloo 23rd June 2015 at 7:52 pm

    SO, the FCA can be sued!!! I didn’t know that. So many others will be thinking of suing now, on this precedent. Think all Advisers need legal protection. Try Abbey Legal Protection, or join the FSB. CII, PFS and networks may get corporate deals for us.

    Hope this all leads to better regulation. Of course, no one will be held criminally liable, that goes without saying.

  10. Julian Stevens 23rd June 2015 at 8:59 pm

    Which law, exactly, states that “the FCA is meant to keep individuals anonymous to avoid legal prejudice in possible future cases against them………..and is also meant to give that person a right to make representations before findings are published”?

    Is it statute (which the FCA routinely ignores) or is it just set out somewhere in the FCA’s own rules (which it concocts and, as needed, amends to suit its own purposes)? Either way, a battery of lawyers appear to consider that firstly the FCA has breached either statute or its own rules and secondly that the seriousness of these breaches is such as to override the FCA’s statutory immunity from prosecution. The fact that the FCA has not attempted to invoke its immunity suggests that it has been forced to accept this.

    If this cause is just, I very much hope these actions succeed and that, in so doing, they set a key precedent that the FCA will not in future be able casually to brush aside future actions against it on the grounds of statutory immunity.

    Will Parliament finally stop dithering and act to bring the FCA within the rule of law? For far far too long, the FCA, like the FSA and the PIA before it, has been allowed to get away with acting like some unbridled monster trampling roughshod over anyone and any body that dares to try to stand in its way. Yet Martin Wheatley seems to think this is perfectly okay. It isn’t.

  11. This is a tip of the iceberg, problems on funds like Managing Partners Ltd., Traded Policies Fund and EEA Life Settlements which were mis-sold in the UK were condoned by the FSA by registering the companies on their register that marketed these high risk products as low risk.

  12. First question Martin

    Why does it make deterrence more difficult?

    Surely everyone knows if they have done wrong and get caught then the whole truth will out. It doesn’t matter one jot what the transgressor’s name is at the “not yet proven” stage.

    It’s just one more example of the FCA not knowing when to stop acting as though they can do whatever they want.

    Ian Coley
    Medical Investment & Advisory Services LLP

  13. Julian Stevens 24th June 2015 at 9:53 am

    The FCA’s standard statement to absolve itself of responsibility for the consequences of any product/fund/provider that goes bad is that authorisation does not mean approval. This is pretty much an admission that it’ll authorise almost anything, with no attempt at any sort of due diligence, provided the application forms, as completed, look okay. Due diligence is the responsibility of anyone who may be considering recommending said product/fund/provider.

    By the same token, intermediaries commonly fudge their RMA returns in the knowledge that none of the data are ever checked. All that matters is that the totals cross-tally so that the machine accepts them. This explains why the FCA commonly fails to identify and take action on untoward trends such as high and potentially unsuitable sales of UCIS or anything else that it doesn’t like the look of, and fails to turn up at the scene of the accident until way after the train has left the rails. What does the FCA care? There’s always the FSCS to bail out investors and the FCA has no qualms about the destruction of a few dozen more firms as a result of them being forced into default. They shouldn’t have sold such junk in the first place, particularly if it wasn’t covered by their PII.

    Then again, I may be doing the FCA a grave injustice. For all we know, the FCA may reject every year dozens of applications for some new fund or product that doesn’t look kosher. But we never know much of the FCA’s internal processes so this can only be speculation.

  14. I don’t know enough about the individual cases cited in the reports and make no comment on the merits of any of those challenges. I have however, seen first-hand the FCA struggle with third-party rights in the past (these rights for persons mentioned/identifiable from the text of a public statutory notice issued by the FCA) and they routinely fail to see the obvious logic in some case. Whilst the FCA is far from a perfect organisation, and I do not defend it for one moment, it is in the area of deterrence/visibility, inevitably walking a tightrope of politically-motivated provisions thrust upon it through amendments to FSMA and what might properly be described as simple common sense. It is pleasing to see that legal challenge has been mounted, as those who have experienced an enforcement investigation can attest, it is a skewed, deeply unpleasant affair and one which is often (but not always) devoid of genuine intellectual rigour on the part of the investigators. That absence of focus is indeed, illustrated by the fact that the FCA is now apparently facing legal challenges to its practices as has been reported.

  15. As advisers we are expected to show capital adequacy, the same should be relevant of the FCA and funds in their coffers received from fines should not go to well deserving charities (sorry), it should be a) used as a fund where liability like this has arisen, (although that should never happen) and b) to discount the fees for the good advisers…

  16. Glad to see that Martin Wheatley is defending his organisations position as he will obviously resign waiving any gardening leave if they loose their legal case….. oh wont they?

  17. @Julian – re the RMAR – As a Network member I suspect you’ve never done one, so your opinion is just that…. opinion and hearsay, not proven fact.
    My RMA is pretty accurate and within the bounds the FCA quote is acceptable for accuracy. It used to take me 3 or 4 days, but due to how I use Prestwood software, it pretty much comes up with what I need without significant manual input, so I can do it in a day now. The data is still pretty useless in that it fails to ask anything which might have prevented some of the traincrashes with unregulated investments held in SIPPs etc. I dont think it even differentiates between a SIPP and a PPP/SPP and as the former can hold UCIS and not the latter, this could have been a pretty big hint as to who was selling what!

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