Third party rights relating to Final Notices trump litigation deadlines at the Upper Tribunal

In its recent decision the Upper Tribunal allowed for a late filing of a reference on third party rights in relation to FCA final notices.

Background

Mr Christopher Ashton was employed as a foreign exchange trader by a subsidiary of Barclays, which was (along with a number of other leading banks) the subject of an FCA investigation into forex trading.

Mr Ashton applied to make a reference to the Tribunal out of time, claiming he had been improperly identified in a decision notice issued to UBS on 12 November 2014 by the FCA relating to G10 spot FX trading operation failings. However, he had already made a separate reference to the Tribunal on the same grounds in respect of a FCA decision notice issued to Barclays on 20 May 2015. This second reference was made in time.

Mr Ashton contended that the content in both notices was prejudicial to him; as such he should have been afforded third party rights under s393 FSMA and given a copy of the notices.

At the time the UBS notice was published the Court of Appeal hearing of FCA v Macris [2015] was awaited. The hearing eventually took place on 11 December 2014, just two days after the expiry of the deadline for Mr Ashton's reference to the Tribunal. The judgment, which refined the test to be applied in determining whether an individual has been identified in a statutory notice for the purposes of s393 FSMA, was published on 19 May 2015.

Mr Ashton's lawyers had advised Mr Ashton to delay submitting a reference in respect of the UBS final notice pending publication of the Barclays final notice. This advice was predicated on the lawyers' expectation that the Barclays final notice would contain material prejudicial to Mr Ashton. However they had not anticipated the quotations set out in the UBS notice, which Mr Ashton contends clearly identify him and accuse him of collusion in manipulating FX rates through participation in traders' chat rooms. According to the judgment the lawyers were 'surprised' to see statements in the UBS Notice which were attributed to employees working at Barclays.

The Judgment

Judge Timothy Herrington agreed with the FCA that 'the time limit serves an important public interest in the finality of litigation' and will have a significant impact on how the regulator deploys its finite resources.

Judge Herrington also found Mr Ashton could have taken guidance from the Tribunal's decision in Martin-Artajo v FCA [2014] - the facts of which were largely similar to Mr Ashton's case. In its judgment on Martin-Artajo the Tribunal observed that where a party was uncertain as to whether to make a reference pending further developments, they could nonetheless make the reference and ask for a stay or agree an extension of time to file a reference with the FCA, until the position became clearer.

Whilst Judge Herrington acknowledged this was 'a borderline case' he concluded the 'balancing exercise' came down in favour of granting an extension of time because:

1. there was 'considerable linkage' between Mr Ashton's contentions about the Barclays notice and the UBS notice: the underlying criticism in both being the inappropriate disclosure of information in chat rooms with traders from other banks;
2. the prejudice to the FCA is limited in terms of its allocation of resources, costs and expenses because the subject matter of the two references is largely the same;
3. it would be unfair to Mr Ashton to bear the consequences of actions he took based on professional advice (however Judge Herrington made clear that if there had not been such a close link between the two notices he would not have found this a strong enough factor alone to grant the extension); and
4. as the Tribunal made clear in Martin-Artajo, the strong public interest in the FCA's decisions being as accurate as possible should be taken into account. This was more likely to be achieved if those decisions were properly tested.

Comment

Whilst providing a useful reminder of the authoritative decisions of Macris and Martin-Artajo, the Tribunal's decision in Mr Ashton's case also confirms the importance the Tribunal places on third party rights in FCA enforcement proceedings.

Moreover, these references impact on the FCA's ability to settle an enforcement case if it is forced to reconsider third party rights in respect of a decision notice it has already published. The regulator will be keen to prevent this form of satellite litigation happening too frequently, not least to avoid criticism of improper publication of decision notices and the manner in which it conducts its investigations.

The preliminary issue in relation to both references was due to be heard on 27 October 2015.