LONDON Ian Hannam, one of London's most prominent bankers who is fighting to clear his name after a 2012 fine for market abuse, was disciplined by his bank four years ago over his working practices, according to court documents.
JP Morgan Cazenove (JPM.N), Hannam's employer at the time, imposed "very significant and extensive restrictions" on him after a disciplinary inquiry in 2009, documents released by Britain's financial regulator showed.
The high-profile case, which began in a London court on Tuesday, tests the mettle of the three-month-old Financial Conduct Authority (FCA), a revamped regulator determined to hold to account senior bankers and their employers for market abuse or sloppy controls. It will also fuel a debate about what constitutes inside, or market-moving, information.
JP Morgan Cazenove's disciplinary action against Hannam related in part to a number of emails, including two emails at the centre of the case.
JP Morgan declined to comment.
The FCA's predecessor, the Financial Services Authority (FSA), had alleged Hannam sent the two emails on behalf of a client, Heritage Oil HOIL.L, in September and October 2008, which included potential inside information.
Both emails were sent to Kurdish oil minister Ashti Hawrami. The first, which referred to a potential offer for Heritage and a price, did not name a buyer. The second mentioned an oil find.
The FCA documents alleged that Heritage was forced to issue an announcement about bid talks nine days after the September email because the UK Takeover Panel regulator noticed "untoward movement" in Heritage's share price.
Hannam, known for multi-billion-dollar deals that transformed Britain's blue-chip share index, and links to U.S. generals and Iraqi ministers, is appealing to restore his reputation and overturn the 450,000 pound ($685,100) fine.
The banker, in court for the opening of his case a day before he takes the stand, said he did not believe he broke any rules.
"The case raises questions about the definition, and treatment of, inside information on the corporate finance side of the "Chinese Wall" and clarification by the Upper Tribunal is important for London as a global financial centre," he said in a statement.
The Upper Tribunal hears appeals on cases brought by the regulator.
Hannam resigned from JP Morgan Cazenove last year, leaving his position as global chairman of equity capital markets after two decades at the firm, to pursue his appeal.
In court, Hannam's lawyer Laurence Rabinowitz said that in relinquishing his position at JP Morgan to fight the case, Hannam had suffered a serious financial loss and considerable damage to his standing in the financial industry.
Hannam has admitted that he made a mistake when he blind copied his October email, disclosing information about progress with Heritage's oil exploration program, to an advisor to companies with interests in Kurdistan.
But he has said his emails were too general to constitute inside information and that he was acting in his client's interests.
Rabinowitz told the court that the regulator itself did not understand what constituted insider information and accused it of "flip-flopping" between definitions to suit its argument.
The FCA documents released in court said that 57-year-old Hannam had a "relaxed" attitude to disclosure.
Richard Boulton, the leading lawyer for the FCA, told the court that inside information should be easy to spot. "If it looks like a duck, walks like a duck, quacks like a duck, it is a duck."
Hannam has also said no one made any personal gain from the information in his emails and has noted that his honesty and integrity were not questioned by the regulator, who also did not remove his "fit and proper" status.
Rebuilding his reputation is critical for Hannam, who is building up a gold venture in Afghanistan and an advisory firm Strand Partners, which includes some of the JP Morgan team that were among the most influential in the sector.
($1 = 0.6568 British pounds)
(Writing by Kirstin Ridley. Editing by Jane Merriman)