Is it ever possible to regulate financial journalists? Article icon

Is Helen Dunne reviews a lively morning debate

The Financial Services Authority issued Market Watch 37 in September 2010. This comprises recommendations to assist regulated and unregulated firms in handling leaks and media enquiries related to market sensitive information. 


From my perspective, Market Watch 37 is not only utterly unworkable and impractical but it has been drafted by people who have no idea how the financial press and financial PR operates. The heavy handedness with which regulated firms are expected to deal with members of the press approaching them with enquiries is probably going to deter journalists from checking and therefore leave stories unchecked and as a result I think you will ave a more disorderly market than one which has more integrity.

This will make everyone's lives in the corporate communications world much more difficult. It will also undermine relationships between the financial press and companies and the PR firms that work on their behalf. If you start tape recording conversations you will break down any sort of relationships.

Some of the reporters in my department are actually having some of this bulletin quoted back at them as a reason for not being more helpful. These are supposed to be guidelines that the FSA has produced, yet they are already being taken as gospel by regulated firms and PR firms.

There is an old stockmarket saying If it's in the press, it's in the price. We are not responsible for leaks; the market participants are responsible for the leaks. We are simply reporting on the leaks and disseminating them to a wider audience. In that way we are levelling the playing field. We are sharing information particularly to those retail investors who may aren't involved in the general cut and thrust of things. The FSA is trying to shoot the messenger. They should try to curb the flow of inside information, which I would argue is almost impossible to do anyway.

There is a whole wild west out there of blogs and chat rooms. They are not going to play by any of these rules. If the FSA regulates us too hard, they are going hand the ball over to these guys who know no bounds. They will print rumours and half truths and that will create an utterly shambolic market.

Journalists have professional pride and do not want to publish an inaccurate story. I find it immensely helpful when an in-house communications person says on the record We never comment on a market rumour and, off the record, You are not even close.


One of the great strengths of the Anglo Saxon markets is the quality and credibility of the financial press and reporting. One of the unintended consequences from a badly enforced change in the regulatory environment is that we threaten that quality and credibility.

There are certain truisms. One is that leaks will happen; sadly someone will always have a motivation to push a certain outcome. Another is that lawyers will always prevail. There are some proposals in Market Watch 37 that look more frightening than they really are and in fact merely enforce regulations that are already in place. This is especially true in regulated firms where they are already enforced with different levels of severity. When I worked at Morgan Stanley, a very strict media policy existed that these FSA proposals would merely codify.

My biggest concern about this is that you are essentially taking the policing and governance of this issue from those who are highly trained and highly regulated and putting it into the hands of those, such as media relations people, many of whom are not.

One of the unintended consequences will be to increase the number of people that have access to highly confidential information. In my experience the fewer the number of people that know the less likely there will be a leak. Corporate clients are often shocked at the number of people that are routinely brought into the loop in investment banks and other advisors when they think they are dealing with a very small advisory team on a need to know basis. A core advisory team may appear to the client to be just three or four people, but when their 'insider list' arrives it may also have half the bank's legal team, the equity capital markets guys and half the M&A department; now we are adding media relations and others. I think this could create a disincentive for corporates to seek proper financial advice because they fear a leak is more likely and, therefore, the transaction is more likely to fail. There is a strong correlation between deals that are leaked and those that fail.

We have to look at ourselves as an industry and make sure that we have been robust enough and that we haven't used the financial media for our own benefit, and that we haven't been complicit or even just too passive, in allowing a leak culture to prevail.

One of the functions of a PR person is to assess what information the journalist actually has; to try to codify and regulate that interaction seems impossible and something that the courts would shy away from. And these recommendations do not allow for what is inherently a virtuous act; the clarification and neutralisation of misleading information in the marketplace.

The FSA needs to focus more on enforcing the rules it already has in place. The best means of restraining leaks is a few more high profile prosecutions for insider dealing.


What the media is trying to do is to get useful, credible information and insight out to the market; what the FSA is doing seems contrary to that. Things happen very quickly, information goes everywhere and the market takes a view on it. Anything that puts friction into that process can only be bad for the markets. The whole basis seems to be quite flawed, as what markets will be left with is the spin.

The FSA appears to be worried about the orderly communication of information. And the idea seems to be that orderly equals the RNS statement, codified by the regulated entity, and anything else is chaos and disorder and doesn't serve the market. I would reject that. When a journalist receives good information that they think the market wants to know, there is a rigorous process of checking and weighing it for credibility and spin, to present the reader with something that is very ordered and carefully considered.

The media's goal is to compete to inform the market to give them good information. I think we are pretty good at it. These proposals are actually undermining the FSA's goals.

These are the personal views of Chris Hughes as a columnist for Reuters Breakingviews and not those of Thomson Reuters.


If the FSA is seeking to create an anti-leaking culture, does that mean an anti-guidance culture? Their actual statement suggests that, if a journalist comes to a company with substantial information which they believe is correct, any confirmation or affirmation of that is potentially a breach of the law or market abuse. Let's look at that from a practical point of view. A journalist says I've heard that you are going to be bought by company B (you are company A), and the price is £10 a share. The reality is that the price is £8 a share. You say nothing because you can't. You follow the rules and the story gets written. The FSA would, rightly, tell you to inform the company and advisors and for you to put out an announcement to avoid a false market. But in the fast-moving news world stories get written before this can be done. By not being able to guide you have arguably been a party to creating market instability and volatility. This is the very thing that the FSA was created to ensure didn't happen: it is there to ensure orderly markets.

It is very easy to view leaks as insider dealing. But I think we need to separate discussion of media leaks and issues of supposed insider trading - if you were to have insider knowledge and wanted to trade upon it, the last thing you want is to see it appear in the media.

We have a responsibility to communicate in the best interests of our clients - that is what they pay for in terms of PR. The journalist has a responsibility to get stories and to get information. Max Frankel, former executive editor of the New York Times, once said information that wants to get out will get out.

If we are put into a situation where there is a lack of communication, you might get irresponsible journalism. You could get stories about clients with, potentially, little ability to know what is coming, how to prepare for it or how to do anything to correct it. I think that is quite worrying. I'm not saying that is going to happen, but when you have this debate you start to consider these things.


In the US, the transactions process is really driven by lawyers whereas in the UK we still work on the basis that you will have a strong, detailed press release, which ought to have all the important information that might affect the market. Then we can analyse what people might ask us and work out how to deal with these things. We can work in real time. If a journalist spots something that we hadn't thought of, we can have a grown up discussion about it and deliberate whether we are going to disclose it.

In the US, any document prepared for a transaction has to go onto the Securities & Exchange Commission (SEC) website. As a result, you get a very bland document and a set of questions that the company has prepared for. American chief executives readily retreat behind SEC rules as a way of avoiding dealing with questions. The culture in the UK is more robust. Many of my non UK clients are shocked by the lack of deference from the analyst community, investors and journalists. The UK system currently allows PRs to go beyond what is actually written in the statement.

I don't think the FSA can or should stop journalists looking for sources, cultivating them and getting stuff into the public domain. I find it a very good lever when I have a difficult client who might say Why do I need to disclose this or answer that question? And I can say, Well, you'll have Ian King on the phone tomorrow and you need to have an answer or If you don't put this out, then you are going to get into serious trouble because you are not giving people a fairly honest and straightforward view about what is going on.

Communicating with the media is a skilled job that shouldn't be left to amateurs. We are reluctant to see either what we do, or what journalists do, regulated because you end up with companies forced to communicate through legal documents rather than have a grown up conversation with someone and actually help them to understand the situation.

The old days of Friday night drops are over. Journalists get their stories through a lot of hard work and perspiration. Rather than thinking Oh wouldn't it look good if we give it to so and so and they will write it up in the way that we want it to be written. My preference is to communicate cleanly and properly, give everyone the same information at the same time and have your arguments fully prepared. I am not sure whether this [idea of positioning stories through 'strategic' leaks] has disappeared entirely but having people ring up journalists and give them half truths and spin to try to put pressure on companies and individuals is actually the sign of a poorly functioning market.

A lot of people who try to manipulate the press don't really think through the implications of what they are doing. I would hope that one of the rules that people live by - I certainly do - is don't lie, don't mislead. People will find you out. Don't try to play games. Play straight. Play fair. Journalists have to ask themselves would they rather be dealing with people that need to operate within rules of fair dealing and have those people managing and dealing with information flows, or have a free for all, with anyone who thinks they can play games and doesn't mind whether they lie or they cheat as long as they get their story in the papers.