(Recasts, adds details, background, JPMorgan comment)
By Clare Hutchison and Kirstin Ridley
LONDON May 28 One of London's most prominent
investment bankers lost his appeal against a heavy fine for
market abuse on Wednesday, in a case that has fuelled a
high-level debate about the rules around deals and the
disclosure of information.
Ian Hannam was famous in financial circles as a so-called
rainmaker at JP Morgan, able to generate business and
whose presence alone was enough to bring in clients, money and
But the former soldier fell foul of Britain's financial
regulator and he was hit by a 450,000 pound ($756,100) fine in
2012, one of the largest ever imposed on an individual.
The Financial Services Authority, which became the Financial
Conduct Authority (FCA) in April 2013, had accused 58-year-old
Hannam of sending two emails in 2008 that contained "inside", or
unpublished and potentially market-moving, information relating
to a potential takeover and possible oil discovery.
No one traded on the information, Hannam's honesty was not
questioned and he retained his "fit and proper" status. Hannam
said in his defence he was acting in his client's interest in a
manner appropriate for a financial adviser.
He launched an appeal against the fine last July, but in a
130-page decision, the Upper Tribunal - a superior court
presided over by three High Court judges - ruled Hannam had been
guilty of market abuse, even though his actions were
"We formed the impression of him as a man much more
interested in and comfortable with the large picture than with
the detail," the Tribunal said.
The closely-watched case has raised questions over the
strength of banks' "Chinese walls", or internal controls
designed to prevent those with confidential information passing
it on to others who could profit from it.
Rob Moulton, a partner at law firm Ashurst, said the legal
profession, and its clients, had been saved a great deal of
confusion by a decision that effectively upheld the status quo.
"There is something of a generational point here between
people who worked in the City (of London) when your word was
your bond and ... there was much less formality, compared to an
environment where everyone ticks boxes, has checklists, uses
scripts," Moulton said.
"(But) the judgment will not create great change to
procedures being followed ... and I don't think it will require
people to have internal processes that currently do not exist,"
KING OF MINING
Hannam earned the nickname "king of mining" after brokering
several high-profile deals in the resources sector, including
the London listing of Kazakh copper miner Kazakhmys.
After 12 years at JPMorgan he quit his job as chairman of
capital markets at the bank to fight the fine and clear his
The two emails at the heart of the case were sent on behalf
of oil and gas exploration company Heritage Oil, which
hired JPMorgan in 2007 to secure a "substantial" deal. Heritage
began talks in 2008 with a company called Genel Energy, based in
Hannam sent two emails in September and October 2008 to
Kurdish oil minister Ashti Hawrami. The first did not mention
Genel by name but referred to a potential offer for Heritage and
a price. The second email mentioned an oil find by Heritage.
In his appeal, Hannam said both emails were too general to
constitute inside information and the information on the oil
find was a mistake.
"I either made it up or I was putting a spin on it to get a
meeting (with the minister)," Hannam said when giving testimony.
In a statement, Hannam, who could yet appeal against the
latest decision, voiced his disappointment but said: "Launching
an appeal is not a decision to be taken lightly and will require
Hannam is now involved in building up an advisory firm
called Strand Partners.
The Tribunal has yet to decide on whether to allow the fine,
or set another one, and invited both parties to negotiate. It
noted a possible defence under which the regulator cannot impose
a penalty if an individual reasonably believed he had not
committed market abuse.
JPMorgan declined comment.
($1 = 0.5952 British Pounds)
(Editing by Susan Thomas and David Holmes)