The UK press vs the FSA

By Felix Salmon
October 12, 2010
Remember the FSA's hilarious attempt to stop M&A leaks coming out of investment banks? Well, the UK press certainly does.

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Remember the FSA’s hilarious attempt to stop M&A leaks coming out of investment banks? Well, the UK press certainly does. The editors of the FT, Times, and Guardian, as well as Reuters’s very own David Schlesinger, have written a “we, the undersigned” letter to the FSA expressing “profound concerns” with its recommendations and asking the agency “to reconsider and revoke” them:

Regulated firms will find it much easier to hide behind bland press releases that conceal inconvenient corporate realities and there is a heightened risk that journalists will feel compelled to publish unconfirmed reports and rumours, increasing the flow of misinformation.

Journalists and the media play a key role in maintaining a level playing field in the market by unearthing and disseminating information – including information that companies seek to hide, obscure or spin. By adopting an overly prescriptive approach to preventing leaks, the recommendations would greatly restrict the capacity of the media to carry out investigations of regulated firms such as banks, asset managers and brokers…

It is also far from clear that the recommendations will even achieve their stated objective. Individuals who want to leak information will always be able to find a means of doing so and the plan fails to adequately address strategic leaks.

There’s no indication that the letter will have any more effect than the original newsletter. Indeed, when confronted with this level of rhetorical firepower from the very heights of the UK journalistic establishment, the FSA blithely dismissed it through a spokeswoman:

An FSA spokeswoman reiterated that its newsletter was in response to concern from companies and investors, and said obligations to keep inside information confidential had not changed.

“We have simply reminded firms of their existing obligations and provided best practice views around systems and controls,” the spokeswoman said.

To risk stating the blindingly obvious: all this high-level philosophizing on how companies should or shouldn’t work with journalists is not going to make any significant difference either way. If companies want to blandly obfuscate, they will do so regardless of what the FSA thinks, and if they want to leak, they will leak.

By far the silliest part of the FSA’s “best practice views around systems and controls” was the way in which they seemed to envisage a world where aggressive journalists would constantly call up investment bankers in the middle of the weekend, asking “I say, old chap, is there some M&A deal you’re working on?”, and the investment bankers would say “you know, funny you should mention that, it just so happens that LVMH is putting together a hostile bid for McDonald’s at $117 per share, payable in Swarovski crystals and vintage Champagne”.

In the real world, as the letter quite rightly points out, leaks happen for a reason, and the first contact is very likely to be in the other direction: the banker will send a text message to the reporter, say, or a trusted intermediary will ensure the information is passed along at a tactically-optimal point in negotiations.

It’s true that for less sensitive stories, reporters tend to hate being babysat by PR people, and the interviewees often don’t much appreciate it either. But that’s not the kind of issue worthy of what Reuters describes as “a rare joint letter” from otherwise highly competitive editors — one, no less, in which they all but come out and threaten “to publish unconfirmed reports and rumours” if the FSA’s recommendations are enacted.

Is there a subtext here I’m missing? My feeling is that all of this is a skirmish in a much larger war over the freedom of the press — a war in which government authorities and big corporations want reporters corralled and controlled, while newspaper editors and the reporters themselves want untrammeled freedom. That’s an important principle to fight for, and so the UK press is responding aggressively to any real or perceived incursion on their freedoms, no matter how silly it can seem to outside observers. In any case, if you want to read the letter yourself, I’ve embedded it here.

Letter for Hector Sants, FSA

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“Is there a subtext here I’m missing? My feeling is that all of this is a skirmish in a much larger war over the freedom of the press — a war in which government authorities and big corporations want reporters corralled and controlled, while newspaper editors and the reporters themselves want untrammeled freedom.”

Of course it is. In the financial press, you live and die by the quality of your scoops. The FSA’s proposals threaten to kill genuine journalistic competition among financial newspapers (at least as far as UK regulated firms are concerned), turning them into nothing more than vehicles for marketing and tools for market abuse (no jokes please).

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