The FSA’s foolproof method for preventing M&A leaks

By Felix Salmon
September 23, 2010
investigation into the way that big M&A transactions can get leaked before they are formally announced. Its conclusion might shock you, so make sure you're sitting down for this:

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The UK’s FSA has conducted an investigation into the way that big M&A transactions can get leaked before they are formally announced. Its conclusion might shock you, so make sure you’re sitting down for this:

Our enquiries revealed that media reports containing leaks were often closely preceded by telephone conversations between insiders occupying senior roles on a corporate transaction, and the journalists who published those media reports. Due to their position as insiders, these senior individuals held detailed knowledge of the transaction. The calls between the insiders and journalists lasted up to 20 minutes in length and in some cases took place with journalists the afternoon or evening before the leak was first published.

The FSA is unhappy about this: “leaks ahead of announcements pose a threat to market integrity”, they write. But never fear, they’ve worked out how firms should deal with this problem:

Regulated firms should have a robust and detailed media policy…

Internal policies should require all initial media enquiries received by a regulated firm’s staff to be immediately directed to the firm’s media relations team…

Internal policies should also require that once an initial media enquiry has been passed to a regulated firm’s media relations team, the media relations personnel should review the enquiry to decide if it potentially relates to inside information…

If the enquiry potentially relates to inside information, [and] if it is necessary to involve non-media relations personnel, the media relations team must only grant authorisation to other staff members to communicate with the media… where the conversation between the other staff member and the journalist is held on a recorded telephone line.

There, that should do the trick. I’m sure that from here on in, there will be no more M&A leaks in UK newspapers. I only wonder why the SEC hasn’t figured this out yet.


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