Ian Hannam, one of the City's biggest deal makers, has quit as chairman of capital markets at JPMorgan Cazenove after being fined £450,000 by the Financial Services Authority (FSA).
Mr Hannam, who is advising Xstrata on its $90bn (£56bn) merger with Glencore, will leave once that deal is completed in the summer. He is appealing against the FSA fine.
The FSA said Mr Hannam had sent out emails to two potential clients in Kurdistan talking about a possible bid for his client Heritage Oil and later a new oil find by the company. This was inside information which he should not have disclosed, the watchdog said.
The regulator said while Mr Hannam had not set out to commit market abuse, it had to take his failing seriously because he was such a senior and experienced banker. It added: "He was a role model for the people that worked for him and for others at JPMorgan."
Tracey McDermott, acting FSA director of enforcement and financial crime, said: "Inside information is extremely valuable and must be handled with care to ensure it is properly controlled and appropriate safeguards are observed. This applies to all market participants but is particularly important for senior practitioners who regularly interact with a wide circle of contacts."
Mr Hannam had been a key adviser to Heritage Oil and its chief executive Tony Buckingham since 2007. The explorer had interests in Kurdistan.
Two years ago the FSA fined three Turkish oil executives £1.2m for insider dealing in Heritage shares. Since then it has trawled through 20,000 emails relating to the explorer and its advisers.
In September 2008, Mr Hannam sent an email to a Kurdistan business representative, Mr A, who is understood to represent the Kurdistan government and blind-copied it to another Kurd businessman, Mr B, which read: "I thought I would update you on discussions that have been going on with a 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 Oil... I believe the offer will come in in the current difficult market conditions at £3.50-£4 per share. I am not trying to force your hand, just wanted to make you aware of what is happening."
The FSA said the email was sent at a time when Mr Hannam knew the organisation Mr A represented might be considering buying a stake in Heritage.
In October 2008 an email was sent to members of his team and to Mr A and Mr B. It had the footnote to them: "PS – Tony has just found oil and it is looking good."
The watchdog said: "It would have been clear from publicly available information that this discovery related to Heritage's Warthog-1 well in Uganda."
Mr Hannam said: "I am appealing the decision notice issued by the FSA... and have consequently decided to resign from JPMorgan.
"Appealing the case while still at the firm would be an unfair distraction to my clients and colleagues."
David Davis, the former Conservative minister and a long-standing friend of Mr Hannam, said he was appalled by the FSA's decision. He wrote a reference for Mr Hamman when he went to the first appeal stage of the FSA's decision to fine him which he lost.
"I have never seen such a thin case," declared Mr Davis. "The FSA is extending the definition of insider trading well beyond what it was intended to cover. In this case there were no beneficiaries and no one lost any money. It is an astonishing decision by a body which has had a history of dysfunctionality."
Mr Hannam said: "I have fully co-operated with the FSA from the start. It is important to note that the FSA has not challenged my fit and proper status and has accepted that I acted with honesty and integrity.
"It has also accepted that I was acting in the best interests of my client and no one benefited or was damaged.
"I strongly believe, and have been advised by my legal counsel, that the FSA's conclusions are wrong and I look forward to challenging them in an independent tribunal."
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