Friday 15 October 2010

FSA rules strain relations between City and press

As the Financial Services Authority (FSA) continues to clamp down on strategic leaks to the media, and journalists lash back at the new proposals, new debates are sparked over the impact these transaction reporting plans could have on market integrity and the overall flow of accurate business information.

A dramatic increase in FSA activity to clamp down on controlling leaks follows recent findings which showed suspicious trades before takeover announcements were not only up on the previous year, but now account for nearly a third of all deals. The FSA’s Market Division has recently issued its “best practice” recommendations, which aim to prevent improper disclosures of inside information contrary to the market abuse regime. Yet, the second recommendation, stating all media enquiries are to be directed to the firm’s media relations team, who will be fully responsible for monitoring all media enquiries, has been met with strong criticism from UK journalists.

This week, editors of four leading national papers wrote a letter of complaint to the FSA to publicly expose their concerns over the potential damage such restrictions could bring to current media handling practices between City firms and journalists.

For the FSA, “Strategic leaks – designed to be advantageous to a party to a transaction – are particularly damaging to market confidence and do not serve shareholders’ or investors’ wider interests.” However, while accepting the need act strongly to deter market abuse, the editors claim “a wilful misunderstanding” in the relationship between the City and the press will be brought about as firms hide behind their media relations personnel, thereby making it easier to distort the flow of reliable information.

Unfortunately, rumours and speculation will invariably affect share prices and damage company profiles. Yet, the online media and the fast pace of our digital environment have changed how information is now conveyed and received. Today, journalists have an extended role to ensure they convey their messages not only to national readers but more increasingly to global audiences in an increasingly timely fashion.

In essence, corporate communication relies on a strong relationship between journalists and the finance market and the recent stir serves to highlight how more constructive engagement and close collaboration between the press and financial regulators will be important to counter future cases of market abuse. We will watch this space!

Click here to read the letter sent by Lionel Barber, Editor, The Financial Times; Alan Rusbridger, Editor-in-Chief, Guardian News & Media; David Schlesinger, Editor-in-Chief, Thomson Reuters and James Harding, Editor, The Times.

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1 comment:

  1. Nice work Claire - have to admit that the FSA didn't really think this one through though.
    Originally the Market Watch newsletter was meant to be a short punchy guidance note. This 12 page missive should have been atwo paragraph note: firms should have a policy for dealing with and not leaking price sensitive or relevent information!
    Hope you are well