FSA sets out best practice recommendations regarding contact with the media

The UK’s Financial Services Authority) (FSA) in the September edition of “Market Watch” has raised concerns regarding leaks.

They state that over the past three years they conducted two examinations concerning leaks:

1. During 2008 to 2010 they carried out a number of intensive enquiries into potential disclosures of inside information to the media ahead of certain announcements. These leak enquiries were conducted with the aim of identifying suspicious contact between insiders to a corporate transaction, and the media. This work also included discussions with regulated firms about their policies governing such contact. 
2. They continued their thematic work assessing regulated firms’ systems and controls on handling leaks.

In the “Market Watch” article they set out the background and present the key findings on both work streams. They also give a list of best practice recommendations regarding contact with the media, as they believe improvement is necessary. They appreciate that several recommendations that they have made could result in significant changes to current media handling practices at regulated firms. However, it is their belief that these changes, particularly those concerning restricting/recording contact between non-media-relations personnel and the media, could substantially benefit most firms. As an example, they indicate that these controls could help exonerate the firm and their staff early on in any leak enquiries conducted by their clients, regulators or the firm itself.

Leaks ahead of announcements threaten market integrity. 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. It is therefore in all interests to ensure that senior management of all organizations who handle inside information establish (and are seen to establish) a much stricter culture that firmly and actively discourages leaks.

The FSA indicate that they will continue to actively monitor for leaks of inside information and conduct enquiries into these with the aim of identifying contact between the media and individuals at regulated/unregulated firms or issuers, and to take appropriate action. If no improvement is noticed in the levels of leaking in UK markets, they may consider rule changes. They will also take action where they deem unacceptable practices have occurred or the relevant existing systems and controls requirements applying to regulated firms and issuers have been breached.

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