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Insiders: SAS banker quits after market abuse fine

A JP Morgan senior banker has quit his job after being fined for abuse of insider information about Heritage Oil.


by Michelle McGagh on Apr 03, 2012 at 10:35

A JP Morgan chairman has quit after being find £450,000 by the City regulator over abuse of insider information relating to a new oil find by Heritage Oil and an offer for the company.

Ian Hannam, chairman of capital markets at JP Morgan Cazenove, has been fined by the Financial Services Authority (FSA) after it discovered he had disclosed inside information in two emails sent in September and October 2008 to a prospective client.

Hannam will appeal the FSA’s decision but has resigned because it would be ‘an unfair distraction to my clients and colleagues’, according to the Guardian.

The information related to Heritage Oil (HOX.L), which was an existing JP Morgan client for which Hannam was the lead adviser.

In the September email, Hannam said of a potential acquisition: ‘I thought I would update you on discussions that have been going on with a potential acquirer of [Heritage Oil chief executive] Tony Buckingham’s business.

‘Tony, advised by myself, has deferred engaging with the client until Thursday of next weeks although we know they are very excited about the recent drilling results of Heritage Oil…I believe that the offer will come in in the current difficult market conditions at £3.50-£4.00 per share. I am not trying to force your hand, just wanted to make sure you aware of what is happening.’

In the second email, Hannam discloses information about a potential oil find, he said: ‘PS – Tony has just found oil and it’s looking good.’

A Fortune article last year described Hannam as a working-class South Londoner, the son of a council worker. He joined the Territorial Special Air Service (SAS) at 17 – one of the youngest men to pass the selection process. Hannam went on to gain a civil engineering degree at Imperial College before going into construction where his first assignment was building roads in Oman.

Hannam then went to business school and embarked on a training programme at Saloman Brothers in New York and worked his way up the corporate ladder – getting caught in the Robert Maxwell fiasco along the way.

The Fortune article said: ‘From Congo to Columbia, from Iraq to Sierra Leone, Hannam and his small team of soldiers-turned-bankers and advisers did business with oligarchs, gem deals, and former mercenaries.’

The FSA said it accepted that Hannam did not deliberately set out to commit market abuse. Hannam has referred the decision to the Upper Tribunal where he and the regulator will state their cases. The Tribunal will determine whether to uphold, vary or cancel the FSA ruling.

Tracey McDermott, acting FSA director of enforcement and financial crime, said: ‘Inside information is extremely valuable and must be handled with care to ensure that it is properly controlled and that appropriate safeguards are observed.

‘This applies to all market participants but is particularly important for senior practitioners who will regularly interact with a wide circle of contacts.’


A Bear Fights Soros and a Bullish Tide on InterOil


Whitney Tilson

Jonathan Fickies/Bloomberg News
Whitney Tilson, InterOil bear.

George Soros

Joshua Roberts/Bloomberg News
George Soros, InterOil bull.

Is InterOil a great way to play Asia’s commodity boom or a overhyped company worth a fraction of its $3.4 billion market value?

In recent weeks, the debate has escalated over InterOil, a publicly traded exploration outfit drilling for natural gas in Papua New Guinea.

George Soros loves InterOil. The billionaire hedge fund king’s Soros Fund Management, which manages more than $20 billion, disclosed in a securities filing this month that it had nearly doubled its stake in InterOil. He owns about 5.3 million shares, or about 12 percent of the company. At $300 million, his InterOil stake is the third-largest stock holding in his fund, according to the filing with the Securities and Exchange Commission.

A spokesman for Soros Fund Management declined to comment on the position. According to securities filings, he began buying the stock in early 2009 at around $33 a share. On Wednesday, InterOil’s shares were trading above $76.

Whitney Tilson hates InterOil. And unlike the Soros fund, Mr. Tilson, who runs the hedge fund firm T2 Partners, isn’t shy about sharing his views. On Nov. 6, in a blast e-mail sent to 2,000 recipients, Mr. Tilson lambasted the company, which he has done periodically — and publicly — over the past year:

“This is a company that has NO RESERVES — not proven, probable or even possible; just a ‘contingent resource estimate’ from a firm that InterOil paid, after shopping among firms — and has NEVER delivered on its countless promises of huge natural resource finds in over 200 press releases over more than 10 years. Sure, there’s gas there — this isn’t Bre-X — but we think there’s only a tiny fraction of what IOC claims.”

Mr. Tilson’s recent tirade came just after InterOil raised $266 million in its first publicly underwritten offering, a deal backed by, among others, Morgan Stanley. He acknowledges that with the capital increase, the short case on Interoil becomes less compelling. InterOil, which has been burning through cash, now has money to finance its capital-intensive exploration business.

Although his hedge funds run only $155 million, Mr.Tilson has carved out a prominent place in the world of stock pickers. A Warren E. Buffett acolyte, Mr. Tilson writes for publications including The Financial Times and runs the Value Investing Congress, a well-attended event where big investors including William A. Ackman of Pershing Square Capital Management and David Einhorn of Greenlight Capital Management show up to discuss their best ideas.

Mr. Tilson isn’t concerned that Mr. Soros’s fund is on the other side of his bearish bet. “George Soros is one of the greatest investors of all time, but he’s made his fortune on big macro calls, not stock picks,” Mr. Tilson told DealBook. “And you need to do in-depth research on this company to understand why InterOil’s not all that its promoters crack it up to be.”

InterOil reported a third-quarter loss this week of $14.4 million on sales of $208.5 million, generated largely through an oil refinery business. “Our efforts to monetize our discovered resources have advanced significantly over the past several months,” said Phil Mulacek, the company’s chief executive, in a statement.

A Morgan Stanley analyst raised its earnings estimates on InterOil on Tuesday, saying it was bullish on the stock with an overweight rating and a $135 a share price target.

Mr. Tilson, who first shorted InterOil around $30 a share in April 2009, is licking his wounds but remains resolute. “We think this stock will ultimately go down in history as one of the greatest promotions ever,” Mr. Tilson said. “Yes, there’s natural gas there, but we think only a small fraction of what the company claims and certainly not enough to justify the company’s market cap.”

Original Article

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