One of London's most prominent bankers was fined 450,000 pounds for passing on inside information in a case that will embarrass his employer J.P. Morgan Cazenove and which marks a push by regulators to target high-profile figures.
Top rainmaker Ian Hannam resigned on Tuesday, to fight the fine imposed by the Financial Services Authority (FSA) in relation to 2008 emails that contained information about one of his clients, Heritage Oil.
The gruff former special forces soldier, who rose from humble beginnings, is the fifth person to be fined in relation to improper disclosure this year by the regulator, which has previously been accused of being ineffectual in its fight against financial crime. Of the five, Hannam is the most prominent.
Hannam resigned from his position as JPMorgan's Global Chairman of Equity Capital Markets, after two decades at the firm, JPMorgan informed staff in an internal memo, which became the talk of the London financial world.
Hannam, a veteran banker in his fifties with a focus on resources and mining and whose current deals include advising miner Xstrata on its merger with Glencore, said he had fully cooperated with the FSA and would appeal against the decision.
I will complete my current client commitments and ensure a smooth handover of responsibilities, Hannam said in an emailed statement. Appealing the case while still at the firm would be an unfair distraction to my clients and colleagues.
The case is a fresh blow for the reputation of investment banking, as Hannam joins the list of big names targeted by the regulator, which has been attempting to clamp down on abuse.
Hannam's fine, detailed in a decision notice dated February 27 and the outcome of a lengthy investigation, is among the largest levied against an individual for market abuse, though it is dwarfed by the 3.6 million pounds hedge fund investor David Einhorn incurred in January over trading abuses.
The FSA said there was no evidence that anyone had traded shares as a result of the emails, or that Hannam made any personal gain, prompting some to question the prominence given to the decision by the FSA, before an appeal.
AFGHANISTAN TO MEXICO
South London-born Hannam, a brusque character who is known to be tough with staff but dedicated to clients, has risen to become one of the biggest names in the industry, playing a key role in the tie-up between blue-blood adviser Cazenove and U.S. rival JPMorgan, as well as a top name in mining.
Hannam's appetite for risk and his belief in frontier capitalism - most famously in Afghanistan, where he supported a nascent mining industry - have made him instrumental in shaking up the once very British bluechip FTSE 100 index, bringing in, over the last decade, Kazakh miner Kazakhmys, Mexico's Fresnillo, India's Vedanta and others.
Hannam helped bring Xstrata to market a decade ago and has since continued to advise its chief executive, Mick Davis, who came to Hannam's defence on Tuesday. Davis said Hannam was a trusted adviser and had his full support in the appeal.
He has always acted with honesty and integrity and I have greatly valued his counsel, Davis said. Ian is a great credit to his profession.
He made deals in Africa, South America and the Middle East. Fortune magazine once quoted him as saying during a visit to Baghdad: I'm here to make five new Iraqi billionaires every year for the next five years.
Hannam, the son of a local government worker, began his career with construction company Taylor Woodrow, and switched to banking with Salomon Brothers in New York in the early 1980s before moving to Robert Fleming in 1992.
The FSA said in its statement that Hannam had disclosed inside information on Heritage, which had mandated JP Morgan in 2007 to secure a substantial corporate transaction, in two emails sent in September and October 2008.
One email contained information about a potential offer for Heritage, where Hannam worked closely with chief executive and former mercenary Tony Buckingham, while another mentioned a new oil find - both potentially market moving.
I believe that the offer will come in the current difficult market conditions at 3.50-4.00 pounds per share, Hannam told a contact referred to by the FSA as Mr A in the September email, disclosing takeover talks.
The FSA says Hannam knew Mr A worked with an organisation potentially interested in investing in Kurdistan, where Heritage was working.
I am not trying to force your hand, just wanted to make you aware of what is happening, he told Mr A in the email.
In a separate email, Hannam told Mr A and a separate businessman with interests in Kurdistan, named as Mr B, that Tony has just found oil and it is looking good.
In his defence to the FSA, Hannam has said the September email was too general to constitute inside information, while the information had already been passed to Mr A by Buckingham.
Hannam has appealed to the Upper Tribunal, which may uphold, change or cancel the FSA's decision.
Heritage Oil declined to comment.
(Additional reporting by Douwe Miedema, Victoria Howley and Tom Bergin; Editing by Giles Elgood)