LONDON (Reuters) - One of London's most prominent bankers begins a battle this week to overturn a 2012 fine for market abuse, in a high-profile case likely to test Britain's newly beefed-up regulator.
Ian Hannam was famous in financial circles as a so-called rainmaker at JP Morgan - his presence alone enough to bring in clients, money and respect. But the former soldier, known for his bulging contacts book and knack for a new idea, fell foul of the City watchdog last year and was hit by a fine of 450,000 pounds.
With the appeal process that begins this week, Hannam will seek to overturn that fine - one of the biggest ever levied against an individual in Britain - and more importantly restore his reputation in what is a major test for him, JP Morgan and for Britain's financial regulator, recently reformed and given more teeth as the Financial Conduct Authority (FCA).
Hannam was accused in 2012 by the then Financial Services Authority of sending two emails in 2008 on behalf of a client, Heritage Oil, which included what the regulator considered "inside" or market-moving information.
His appeal will test the regulator's tactic of targeting high-profile individuals to fight market abuse, following the strategy of U.S. watchdogs. It will also fuel debate over what should - and can - count as inside information.
"The (FCA) put a serious marker down and if it is overturned on appeal to the tribunal, where does that leave them in terms of their ability to put such a marker down and influence senior manager behaviour?" said Harvey Knight, partner at Withers Worldwide, a former lawyer at the FSA.
No one traded on the information in Hannam's emails and his honesty and integrity were not questioned by the regulator, who also, critically, did not remove his "fit and proper" status.
Yet Hannam resigned from JP Morgan in April last year to clear his name, leaving his position as global chairman of equity capital markets (ECM) after two decades at the firm.
The appeal is still likely to be uncomfortable for the bank, raising questions over compliance at the institution for whom Hannam and his team generated significant revenues.
JP Morgan declined to comment for this article, as did spokesmen for Hannam and for the FCA.
Hannam, expected to take the stand on Wednesday and Thursday, is a colourful character in the City. He played a major role in the tie-up of British blueblood bank Cazenove, known for its aristocratic clients, with U.S. rival JP Morgan, and has been a determined adviser for the latter - bringing an international flavour to the London market along the way.
Hannam and his team floated six companies in the FTSE 100 index, bringing to London resources groups from Kazakh copper miner Kazakhmys to India's Vedanta and Essar. He was banker to Swiss miner Xstrata from its creation to its takeover by commodities trader Glencore in a record-breaking deal that closed in May.
The case against him rests on two messages he sent while acting on behalf of Jersey-based oil and gas exploration company Heritage Oil, which hired JP Morgan in 2007 in order to secure a "substantial" deal. Seeking a slice of the growing market in Iraqi Kurdistan, Heritage began talks in 2008 with another oil firm, Genel Energy, that was based there.
Hannam, working with Heritage chief executive Tony Buckingham, sent two emails in September and October 2008 to the 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. Both, said the FSA, were potentially market moving.
Hannam's defence is that he was acting in his client's interests: Kurdistan had been considering its own deal with Buckingham, and Hannam had hoped to leverage a better deal.
Hannam said the September email was too general to constitute inside information. The second, though again too general and information on the oil find too preliminary, was a mistake, he said.
Rebuilding his reputation and clearing his name 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.
Not all Hannam's deals have been successes. Among the most problematic was Bumi Plc, the company that emerged from the merger of financier Nat Rothschild's Vallar vehicle and Indonesian coal assets controlled by the Bakrie family. It has struggled to overcome bitter boardroom battles, a probe into financial irregularities and the tumbling price of coal.
Writing by Clara Ferreira-Marques; Editing by Sophie Walker