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June 28, 2013 10:50 pm
Two reputations are at stake next week: the UK financial regulator’s, pitted against that of one of the City of London’s most influential dealmakers.
Ian Hannam, the former chairman of capital markets at JPMorgan Cazenove, will fight a controversial £450,000 fine for market abuse that the Financial Services Authority – now the Financial Conduct Authority – decided to levy on him last year for disclosing what it maintains was inside information pertinent to the takeover of Heritage Oil, a client of Mr Hannam’s.
The courtroom battle, which will begin on Tuesday, will help resolve a wider question of what constitutes inside information.
Mr Hannam – an ex-territorial Special Air Services soldier known for helping to bring companies such as Kazakhmys and Bumi to the London market – will contend that two emails he wrote in September and October 2008, around which the case will turn, contained information that was neither precise enough nor market-sensitive enough to constitute market abuse.
His team will also argue that Ashti Hawrami, the Kurdish oil minister who was the emails’ recipient, was a government representative who had agreed to be made an insider.
Mr Hannam wrote to Mr Hawrami that Heritage was in talks with a potential acquirer.
“I believe that the offer will come in the current difficult market conditions at £3.50 – £4.00 a share,” the September email reads, according to the regulator’s findings. “I am not trying to force your hand, just wanted to make you aware of what is happening.”
The regulator will counter that the information was material and non-public, and that if Mr Hawrami had agreed to become an insider, proper confidentiality agreements should have been in place; he could have taken advantage of the information to get the Kurdish regional government to buy a stake in Heritage.
Mr Hannam first came to the regulator’s attention after blowing the whistle on improper dealing by Mehmet Sepil, the chief executive of Genel Enerji, the Turkish company set to merge with Heritage until the revelations. Mr Sepil received a then-record £1m fine from the FSA in 2010.
For both parties stakes are high: Mr Hannam swiftly left JPMorgan and while he is still active in natural resources companies, the reputational slur smarts.
For the regulator, the case will determine how far it can go in making sure that its philosophy of “credible deterrence” is indeed credible.
“This is a rare example of a case involving complex legal issues that has not been compromised and settled, and the tribunal’s ruling will hopefully provide clear future guidance,” said Stephen Pollard, a lawyer at Wilmer Hale not involved in the case.
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