R (Fleurose) v Financial Services Authority
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE SCHIEMANN |
| Judgment Date | 21 December 2001 |
| Neutral Citation | [2001] EWCA Civ 2015 |
| Docket Number | >Case No: CO/988/2000 |
| Court | Court of Appeal (Civil Division) |
| Date | 21 December 2001 |
[2001] EWCA Civ 2015
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HON. MR JUSTICE MORISON
Royal Courts of Justice
Strand,
London, WC2A 2LL
Lord Justice Schiemann
Lord Justice Clarke and
Mr. Justice Wall
>Case No: CO/988/2000
2001/1033
ANTHONY SPEAIGHT Q.C. and JOHN PASSMORE (instructed by Lock & Malborough for the Appellant) RICHARD GORDON Q.C. and MARTIN CHAMBERLAIN (instructed by Allen & Overy for the 1 st. Respondent)
This is the judgment of the Court
1. Bertrand Fleurose appeals against a judgment of Morison J. dismissing an application by him for Judicial Review of a decision of the Disciplinary Appeals Tribunal of the Securities and Futures Authority (the SFA”). The Disciplinary Appeals Tribunal (“the Appeals Tribunal”) had dismissed an appeal by M Fleurose against a decision of the Disciplinary Tribunal of the SFA. The Disciplinary Tribunal had found him guilty of improper conduct as a trader in securities during his employment with J.P.Morgan Securities Ltd. (“JPM”). He was suspended from acting as “a registered person” for two years and ordered to pay £175,000 towards the costs of the SFA.
2. The attack mounted by him before Morison J had a number of bases. One was that the provisions of the European Convention on Human Rights had been offended by the way in which he had been treated. We need not concern ourselves with the others since the permission to appeal relates solely to the first.
3. There is a possible preliminary point as to whether or not the Convention has any application in domestic law to the relevant events which took place before the coming into force of the Human Rights Act 1998. This raised points which are perhaps of some difficulty and which were not argued before us since both parties desired us to proceed on the assumption that the Convention did have such application. Since we conclude that Morison J was right to dismiss the application, essentially for the reasons which he gave in his careful judgment, we are content to decide this appeal on that assumption rather than that the parties should incur further expense arguing those difficult points.
4. The background to the case is well set out in the following paragraphs of the judgment under appeal.
“4. The applicant, was a Senior Cash Arbitrage Trader employed at the time by JP Morgan Securities Ltd. It is alleged that on 28 November 1997, with another, his immediate boss, he manipulated the FTSE 100 Index so as to ensure that JPM did not have to make a payment under a binary option. Under the option JPM were obliged to make a payment to the counter-party if both the FTSE 100 Index and the S & P 500 Index were higher at the end of the month than at the beginning. The S & P Index was significantly higher than it had been at its November opening, but by the end of November 28, the last trading day of that month, the FTSE 100 was closer to the ‘strike level’ of 4842.3; that is, the level above which payment would have to be made by JPM. At 4.10 p.m., the FTSE 100 stood at 4856.56 points, and at 4.29 p.m., 4869.856. The FTSE 100 closes at 4.30 p.m. and, during the last six seconds of trading, the Index dropped by 38.08 points to below the strike level. The binary option was ‘out of the money’ and JPM relieved of an obligation to pay approximately £475,500. 6. The reason for the sudden fall in the Index just before close of business was immediately investigated by the London Stock Exchange [LSE], which concluded that it had stemmed from substantial sales by JPM in the cash market during the last ten minutes. JPM carried out their own investigation and acknowledged that the trading activities of its Equity Derivative Group, of which Mr. Fleurose was a member, had breached the provisions of paragraph 2.10 of the Rules of the LSE, which prohibits a member firm, such as JPM, from doing an act or engaging in a course of conduct the sole intention of which was to move the index value. As a result of this breach, JPM were fined £350,000 by the LSE. The applicant was not, at the material time, a member of the LSE, and, therefore, not within the LSE's disciplinary reach.
7. The regulatory authority, [the first respondent, the SFA] to whose jurisdiction both the applicant and his manager were subject, commenced disciplinary proceedings against each of them. The cases were heard, separately because there was, at that time, no power to conjoin them. The case against the manager was heard by a Disciplinary Tribunal over a period of 13 days between 16 March and 7 April 1999. The applicant gave evidence at that hearing, and, in due course, the Tribunal found that the two charges of misconduct had been proved, and the manager was also found no longer to be a fit and proper person to be registered by the SFA. The Tribunal concluded that the manager's sole intention in ordering these sales to be effected by the applicant was to drive the Index down.
8. Between 12 April and 4 May 1999, the charges against the applicant, which were in similar terms to those against his manager, were tried and he was found guilty of the two charges of misconduct; but the Tribunal refused to declare that he was unfit to retain his registration; and he was suspended and ordered to make a contribution towards the SFA's costs. The charges brought against him were in this form:
“THE SECURITIES AND FUTURES AUTHORITY LIMITED (“SFA”) pursuant to Rules 7–60 and 7–61 of SFA's Rules, hereby institutes disciplinary proceedings against Mr. Bertrand Fleurose on the grounds that:
A. He has committed that following acts of misconduct;
(1) In breach of Principle 1 of the FSA's Statements of Principle, Mr. Fleurose failed to observe high standards of integrity and fair dealing in his involvement in the trading activities of the Equity Derivatives Group of J P Morgan Securities Limited on 28 th November 1997. (2) In breach of Principle 3 of the FSA's Statement of Principle, Mr. Fleurose failed to observe high standards of market conduct in trading for J P Morgan Securities Limited on the London Stock Exchange on 28 th November 1997. B. He has ceased to be fit and proper to be registered by SFA”
There followed 11 pages of a document headed “Summary of Facts” giving extensive details of the case and evidence relied upon.
9. The essence of the case against him was that although he acted on the orders of his manager, he knew the true purpose of what he was doing, and, under both his employment contract and the rules of the SFA it was his responsibility to refuse to carry out instructions which he knew to be unlawful and to refer the issue to the compliance officer.
“His willing co-operation in effecting transactions solely designed to depress the Index and his failure to question his orders or to make any reference to the Compliance Department constituted the misconduct alleged against him.”
10. The applicant accepted that it would have been improper for him to effect trades whose sole purpose was to manipulate the Index. His case was that he had no knowledge or suspicion that his manager was manipulating the market and thought that the deals he executed were legitimate deals to unwind a hedge in connection with the binary option. Thus, it was said, he had no knowledge or intent to act unlawfully; he was merely executing his superior's instructions which he had no reason to believe were unlawful.
11. The Tribunal, presided over by a QC sitting with a market man and an independent person, concluded that the applicant had participated in the sales.
“in the knowledge that they were intended to depress the market below the strike level of the binary option”.
In support of their conclusions, the Tribunal relied, amongst other matters, on a statement which the applicant had made very soon after the material events during the course of the LSE investigation. If what he was alleged to have said was said, then his case that he did not know the true purpose of his deals that afternoon became less than credible. Second, they relied on events which had taken place earlier in the afternoon which, as the SFA contended, showed that the applicant knew, at an early stage, of the plan to manipulate the Index. Third, they relied upon the evidence of a witness who described how she observed the traders especially the applicant, to be happy and celebrating at the close. Her evidence was contradicted by the applicant but the Tribunal preferred hers to his and noted that the applicant had taken a close interest in the effect that the sales were having on the Index.
“If, as he says, he was simply unwinding a hedge, there would be no reason to follow these sales so closely.”
And they rejected his explanation that it was merely “natural curiosity”, as unconvincing.
“We are satisfied that, with the knowledge he had acquired earlier in the day, especially at the time of his second telephone conversation with SBC Warburg, Mr. Fleurose understood [his manager's] objectives, which were to depress the FTSE to below the strike level of the binary option, if market conditions made this possible. Mr. Fleurose was clearly a willing participant. He made no attempt to dissuade [his manager] from pursuing this course; rather, he assisted with enthusiasms. The inevitable consequence was that we found Charges 1 and 2 proved against Mr. Fleurose.”
14. For present purposes, it is relevant to note that it was not the appellant's case that he knew that he was being asked to do something which was wrong, and, for one reason...
To continue reading
Request your trial
-
United Kingdom (Secretary of State for the Home Department) v. M.B., [2007] N.R. Uned. 183 (HL)
...of the charges and of the defence will impact on what fairness requires ( R v. Securities and Futures Authority Ltd., Ex p Fleurose [2001] EWCA Civ 2015, [2002] IRLR 297, para. 14). [18] It was said in Customs and Excise Commissioners v. City of London Magistrates' Court [2000] 1 W.L.R......
-
R (G) v X School Governors & Y City Council
...here and in Strasbourg that the level of procedural protection which the Article guarantees depends on what is at stake. Thus in Ex p. Fleurose [2002] IRLR 297 Schiemann LJ giving the judgment of the Court of Appeal said: "14. It is common ground between the parties, and we are content to a......
- R (Bonhoeffer) v the GMC
-
R Evgeniy Igorovich Kuzmin v General Medical Council
...Case No 31503/96) [1998] EHRLR 338; R v The Securities and Futures Authority ex parte Fleurose [2001] EWHC 292 (Admin) and [2001] EWCA Civ 2015; R (Coke-Wallis) v Institute of Chartered Accountants of England and Wales [2011] UKSC 1; [2011] 2 WLR 103 at [23] per Lord Clarke of Stone-cum......