The UK’s Financial Conduct Authority is fining former JPMorgan Chase (JPM) executive Achilles Macris approximately $1.1M for failing to cooperate and communicate properly with regulators during the agency probe into the London Whale fiasco. Although Macris is now agreeing to settle the securities charges, he continues to defend himself. He insists that he stayed “above and beyond any reasonable” transparency standards and that he is only agreeing to resolve this case because the F.C.A. had accepted his contention that he did not mislead anyone on purpose. The FCA would not comment on Macris’ statements about the settlement.
The former JPMorgan executive was in charge of the firm’s chief investment office in London, which was supposed to invest funds for the bank and help offset possible losses. Unfortunately, a bad bet made by the unit on credit derivatives cost the bank $6.2B.
The bet was designed by Bruno Iksil, a trader who garnered the nickname “London Whale” because his trading positions were so substantial in size. These positions would go on to move the prices of credit default swaps.
JPMorgan has had to pay over $900M to settle probes by regulators in the U.K. and the US over the bet and resulting losses. The regulators accused the bank of misstating financial results and not having sufficient internal controls in place.
Federal prosecutors in the U.S. would go on to file criminal charges in the case against two of Iksil’s colleagues, Julien Grout and Javier Martin-Artajo. Macris supervised all three men.
The cases against Grout and Martin-Artajo have yet to be resolved. Grout is a French citizen and France won’t extradite him. Meantime, a court in Spain has refused to honor the U.S.’s request that Martin-Artajo, who is a Spanish citizen, be extradited. The two men, however, still have to face charges brought by the U.S. Securities and Exchange Commission.
In the FCA case against Macris, the British regulator said that the synthetic credit portfolio at issue began experiencing substantial losses at the start of 2012 and traders were told to stop making trades soon after. The regulator said that during a meeting in March of that year, it was informed that the portfolio had experienced $200M of losses because of rebalancing issues but that it was now balanced and no further trading was required. Macris, however, purportedly did not disclose the true extent of the problems the portfolio was suffering.
The following month, Macris, who spoke with the FCA over the phone, purportedly gave the agency the “inaccurate impression” that no changes had occurred to the portfolio since the meeting in March, even though he knew that portfolio’s losses had increased.
Macris has filed his own lawsuit against FCA on the grounds that he was identified improperly in a notice that JPMorgan had been fined. He contended that in that notice he was “wrongly and unfairly accused” of purposely misleading investors. Macris said regulators never gave him a chance to dispute the claims. Attempts by the FCA to challenge his lawsuit were rejected by a court. The Supreme Court of Britain will hear the case next.
Contact our securities law firm if you suspect your losses are due to securities fraud.
Fined JP Morgan trader slams ‘wasteful’ FCA, FT Adviser, February 9, 2016