Ian Charles Hannam v The Financial Conduct Authority
| Jurisdiction | UK Non-devolved |
| Judge | Mr Justice Warren,Judge Bishopp,Mr Douch |
| Neutral Citation | [2014] UKUT 0233 (TCC) |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
| Subject Matter | Financial Services,27 May 2014 |
| Date | 27 May 2014 |
| Published date | 01 December 2016 |
[2014] UKUT 0233 (TCC)
Appeal number FS/2012/0013
Market abuse – Whether two emails contained Inside information – Yes – Whether
emails sent in proper course of exercise of employment – No – Whether defence
under section 123 FSMA available – No – Issue of penalty adjourned
UPPER TRIBUNAL
TAX AND CHANCERY CHAMBER
Financial Services
IAN CHARLES HANNAM The Applicant
- and –
THE FINANCIAL CONDUCT AUTHORITY The Authority
Tribunal:
Mr Justice Warren, Chamber President
Judge Bishopp
Mr Nicholas Douch
Sitting in public in London on 2, 3, 4 and 5 July 2013 and 3 October 2013
Laurence Rabinowitz QC and Emma Jones for the Applicant
Richard Boulton QC and Benjamin Strong for the Respondents
© CROWN COPYRIGHT 2014
DECISION
Mr Hannam’s actions in sending both the September email and the October email
(as defined in our Reasons below) constituted behaviour falling within section
118(3) of the Financial Services and Markets Act 2000 (“FSMA”). He was 5 thereby engaged in market abuse. His actions were not in the proper course of the
exercise of his employment. He is not able to take advantage of the defence
provided in section 123 FSMA. The issue of the appropriate penalty to impose is
to be dealt with on a later occasion.
10
REASONS
Introduction
1. In this reference the Applicant, Mr Ian Hannam (“Mr Hannam”) challenges
a decision made by the Financial Services Authority, whose relevant powers and 15 duties have since devolved to the respondent, the Financial Conduct Authority.
We shall refer to them both as “the Authority”. The decision was to the effect
that Mr Hannam had committed market abuse. He is said to have improperly
disclosed inside information in two emails that were sent by him or on his behalf
on 9 September 2008 (“the September email”) and 8 October 2008 (“the 20 October email”). The information in the September email concerned a potential
third party bid for Mr Hannam’s client, Heritage Oil plc (“Heritage”). The
information in the October email concerned positive developments in Heritage’s
oil exploration operations. Both emails were sent to Dr Ashti Hawrami, the
Minister for Oil in the Kurdish Regional Government (“Dr Hawrami” and “the 25 KRG”), and the second was blind copied to a Mr David Ishag, an adviser to a
potential investor in companies with interests in Kurdistan.
2. We deal with the facts in more detail at a later stage but for ease of
understanding we mention now that Mr Hannam was, at the time, the Chairman of
Capital Markets at J P Morgan, and Global Co-Head of UK Capital Markets at J P 30 Morgan Cazenove (“JPMC”), of which he was one of the three executive
directors. Heritage, a company quoted on the London Stock Exchange, was a
client of JPMC, and Mr Hannam was (and is) a close friend of Heritage’s Chief
Executive Officer, Mr Anthony Buckingham (“Mr Buckingham”). At the
material time Heritage was engaged in (among other things) exploratory drilling 35 in Uganda.
3. Mr Hannam denies that the two emails contained inside information. If he is
wrong on that, he says that the information was disclosed in the proper course of
the exercise of his employment so that the disclosure cannot amount to market
abuse. 40
4. The Authority’s decision was made under section 123 FSMA which allows
it to “impose… a penalty of such amount as it considers appropriate” where it “is
satisfied” that a person has engaged in market abuse. The definition of “market
abuse” is found in section 118 (about which we say more later): it includes, under
section 118(3), the disclosure by an insider of inside information otherwise than in 45
3
the proper course of the exercise of his employment, profession or duties. The
Authority was satisfied that Mr Hannam was engaged in market abuse as a result
of disclosure of inside information and imposed a penalty of £450,000 on him.
The questions for us are whether market abuse is established and, if so, the
appropriate penalty to impose. 5
The Tribunal’s role
5. Our functions on the current reference derive from section 127(4) FSMA:
where the Authority has decided to take action against a person in relation to
market abuse within section 123 FSMA, that person may refer the matter to the
Tribunal. On such a reference, section 133(5) FSMA provides that the Tribunal: 10
“(a) must determine what (if any) is the appropriate action for the [Authority] to
take in relation to the [subject] matter [of the reference]; and
(b) on determining the reference, must remit the matter to the [Authority] with
such directions (if any) as the Tribunal considers appropriate for giving
effect to its determination.” 15
6. Under section 133(4) FSMA, the Tribunal may consider any evidence
relating to the subject matter of the reference, whether or not it was available to
the Authority when it made its decision. The role of the Tribunal is not to act as an
appeal tribunal; it carries out a de novo review of the facts and matters which led
to the reference: it considers the matter “completely afresh” as it was put by 20 Moore-Bick LJ at [37] of his judgment in R (Willford) v FSA [2013] EWCA Civ
677. This is the exercise we have carried out in the present reference.
7. We have been presented with a mass of material including over 400 pages
of written closing submissions. We have thought it appropriate to deal with the
law and the facts at some length and to deal with the parties’ submissions in great 25 detail (although we do not deal with each and every point). This has resulted in a
long Decision and considerable delay in its production. A shorter Decision would
not have done justice to the full, thorough and well presented cases; nor, we think,
would it have left the parties with a proper understanding of why we have reached
the conclusions which we have. 30
The September and October emails
8. It is convenient at this point to set out the relevant parts of the text of the
September and October emails since it is helpful to consider the issues of
interpretation of the legislation which have arisen in the context of those emails
rather than in the abstract. 35
9. The September email reads as follows:
“Dear Ashti [Dr Hawrami],
Following our drink last week and our telephone conversation yesterday, I
look forward to seeing you next week.
I thought I would update you on discussions that have been going on with a 40 potential acquirer of Tony Buckingham’s business. Tony, advised by myself,
has deferred engaging with the client until Thursday of next week although
we know they are very excited about the recent drilling results of Heritage
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