British star banker Hannam loses appeal against market abuse fine

By Clare Hutchison and Kirstin Ridley

LONDON (Reuters) - 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 respect.

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Authority (FCA) in April 2013, had accused 58-year-old Hannam of sending two emails in 2008 that contained "inside", or unpublished and potentially market-moving, information relating to a potential takeover and possible oil discovery.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 unintentional.

"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," Moulton added.

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 name.

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 Iraqi Kurdistan.

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 careful thought."

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)