Kurdistan backs away from scandal

The northern Iraqi region of Kurdistan has distanced itself from an insider trading scandal involving the improper disclosure of privileged information by JPMorgan about one of its clients.

Ian Hannam, the bank's global chairman of equity capital markets, resigned on Tuesday after the UK market regulator imposed a £450,000 (Dh2.6 million) fine for sending two emails about Heritage Oil at a time when the British oil explorer was a potential takeover target and had made a new oil find.

Heritage Oil has a production-sharing contract in the Iraqi semi-autonomous region.

The Kurdish regional government (KRG) said it "confirms that the information identified by the Financial Services Authority [FSA] contained in the two emails was unsolicited, and further confirms that neither the KRG, nor any representative of the KRG, responded to that information or took any action as a result of that information".

In September and October 2008, Mr Hannam told Ashti Hawrami, the KRG's natural resources minister, about both developments, which had not then been made public. Nine days after the first email was sent, Heritage Oil made an announcement it was considering selling a stake in the company.

The KRG bought a stake in DNO International, a Norwegian oil explorer also operating in Kurdistan, at about the same time.

Mr Hannam plans to appeal and continue his financial career once the dispute is over, Bloomberg News reported.

"The KRG considers this to be a UK regulatory matter between the FSA and Mr Hannam, and has nothing further to add," the regional government said.

Mr Hannam, a soldier turned bank executive, was until recently a key adviser to Xstrata amid a £22bn takeover bid by Glencore International, which is partly owned by Abu Dhabi's Aabar Investments.

The upcoming acquisition was dubbed as the largest financial deal of the year. Mr Hannam also helped Xtrata during its initial public offering in 2002.

Mr Hannam and spokesmen for Heritage Oil, the KRGand JPMorgan declined to comment.

Heritage, listed on the London Stock Exchange, fell 7 per cent on Wednesday the next trading day after the fine was imposed

The production-sharing agreements granted by the KRG are seen as more favourable than the technical service contracts issued by the central government.

Intermittent payments by the finance ministry for oil coming out of the region has not deterred the US oil major ExxonMobil from following Vallares, an investment vehicle headed by the former BP chief Tony Hayward, into the autonomous region.

* with additional reporting by Florian Neuhof