LONDON (Reuters) - Bagging its biggest banking scalp to date helps the Financial Services Authority show its aggressive push to stamp out market abuses remains on course despite the departure of two top officials.
The FSA fined Ian Hannam, one of London’s most prominent bankers, 450,000 pounds on Tuesday for passing on inside information, a large sanction for an individual.
Hannam resigned from his job as JPMorgan’s Global Chairman of Equity Capital Markets and will appeal.
The FSA said it was the latest “crossing the wall” case, meaning commercially sensitive information was divulged that could have been used to trade on unfairly.
In recent weeks the FSA’s Chief Executive Hector Sants and top enforcer Margaret Cole have announced their departures ahead of a shake-up in the British financial regulatory framework.
Together they authored the FSA’s “credible deterrence” strategy of pursuing rule breakers more aggressively and supervising firms more intrusively than in the watchdog’s pre-crisis “light touch” past.
News of the departures raised hopes of a more emollient FSA but reining in one of the most well-known and colourful bankers in London will quash such expectations.
“Based on the details we have and what the FSA have been saying for a while, it’s more of the same today,” said Lucy Frew of law firm Gide Loyrette Nouel.
“It’s always good for the FSA to be showing this remains their stance following the news of Margaret Cole’s departure,” Frew said.
Hannam is the fifth person to be fined for improper disclosure this year by the regulator, which has previously been accused of being ineffectual against financial crime.
So far this year, the FSA has levied 24 million pounds in fines in just over three months, compared with 5.3 million pounds in all of 2007, when Cole joined.
Regulators may get powers from next year to warn investors earlier in an enforcement process about concerns over a company or individual.
The FSA is being scrapped in 2013 as part of a reorganisation to learn lessons from a financial crisis that saw the Northern Rock bank nationalised, and the taxpayer having to bail out Lloyds and RBS, partly due to supervisory failures.
The FSA’s aggressive “credible deterrence” policy is a response to this bruising legacy.
Cracking down on market abuse, as with Hannam, is an area the FSA has been putting more effort into over the past year or so, though such cases can take a long time to come to fruition.
“The FSA has come under lot of political pressure to use its powers more and get more convictions for market abuse,” said Charlotte Hill, a partner at Stephenson Harwood, a law firm.
“I would imagine the FSA will have a think about whether they want to bring criminal actions against Hannam as well,” Hill added.
She said the FSA rarely loses appeals in the Upper Tribunal, where Hannam plans to take his case.
“When appealed at this level I don’t rate his chances. This goes to the heart of what regulation worldwide is trying to stamp out,” Hill added.
Unexplained market moves in shares of companies ahead of merger announcements fell sharply to just over a fifth in 2010, a drop the watchdog believed showed its tougher policies were working.
The FSA has been taking a harder stance on several fronts and fines have reached record highs.
Failure to keep proper records and ensure safekeeping of client funds have been a target for the enforcers.
It has also been taking a closer look at whether candidates who want to be non-executive board members at banks actually understand finance and are up to challenging executives.
Several candidates have withdrawn to avoid the shame of being turned down.
The FSA is also taking a closer look at financial products before they come to the market in a bid to end the country’s 20-year litany of mis-selling scandals that have cost the industry more than 15 billion pounds in compensation.
Its successor, the Financial Conduct Authority, will have powers to ban products from next year.
“They are being very much more intrusive and harder on firms and some of my clients say it’s distracting them from the day job dealing with endless questions and requests for documents which is not helping to stamp out malpractice,” Hill said.
Reporting by Huw Jones; Editing by Giles Elgood