Top rainmaker hit by fine for market abuse

ONE of the City’s most senior rainmakers was taken out by the FSA yesterday, as JP Morgan Cazenove’s Ian Hannam was fined for “market abuse” and quit his job to appeal the decision.

The FSA said that although Hannam “did not set out to commit market abuse” and no trading had taken place as a result of his actions, “Hannam’s failings were serious in view of his experience and senior position within JP Morgan”.

He was found to have leaked information about Heritage Oil to a prospective client interested in a possible bid for the company. In two emails sent in 2008, the FSA said that Hannam had told the potential client, an investor in Kurdish oil ventures, that Heritage was in exploratory talks with a bidder and, a month later, that it had struck oil.

The first email, sent in September 2008, said: “I thought I would update you on discussions that have been going on with a potential acquirer of Tony Buckingham’s business [Heritage Oil]... believe that the offer will come in in the current difficult market conditions at £3.50-£4.00 per share.”

The second, sent a month later, said: “PS – Tony has just found oil and it is looking good.”

The regulator said that the recipient of the emails might have known some of the information already and that there was no evidence that trading had resulted from the emails, but that the disclosures were a “serious” breach of the rules.

Hannam, a former SAS soldier, denies market abuse and is appealing the decision in the Upper Tribunal, an independent judiciary body. He is likely to make the case that the FSA’s definition of market abuse is too broad and the information disclosed not specific enough to constitute a breach.

Despite the appeal, he resigned as JP Morgan Cazenove’s chairman of equity capital markets because he said that the fight to clear his name would be a “distraction” for colleagues.

Lawyers said the approach taken by the watchdog is a significant ramping up of its stance on wall-crossing – becoming an “insider” who is privy to sensitive information about a company.

The case extends the definition of “market abuse” so that it includes merely the sharing of information, rather than a tangible market effect resulting from any disclosures.

The FSA’s acting director of enforcement Tracey McDermott said: “Inside information is extremely valuable and must be handled with care to ensure that it is properly controlled.”

Despite resigning, Hannam will continue to advise on some major transactions for his closest clients, such as miner Xstrata’s proposed merger with commodities giant Glencore.