Finance reporters face ‘legal risks’ over market abuse rules

Date: 13/09/01

By Peter Chapman

FINANCIAL journalists covering stock markets could be held criminally liable for the publication of stock tips and market analysis if new EU rules are approved, European publishers have warned.

The draft law on market abuse aims to clamp down on organised criminals and rogue traders by setting common rules and systems of oversight by national authorities.

But the European Publishers Council, a group of media chief executives and chairmen, claim the proposals would expose journalists covering EU markets to huge legal risks. A clause in the directive would allow member states to make "special provisions for journalists" - wording which the industry fears could tempt member states into putting legal shackles on stock market reporters.

EPC chairman Francisco Balsemão has written to Single Market Commissioner Frits Bolkestein and the MEP in charge of scrutinising the rules, Robert Goebbels, warning of the risks - although he insists that reporters should not be given special treatment if they are "wilfully and unlawfully creating market abuse". "We feel that this will be interpreted by member states as an invitation to lay down special new statutory rules for the media rather than making an exemption, as nowhere is an exemption mentioned as an option," says Balsemão, also chief executive of Portuguese media firm Impresa. He is calling for a special exemption to be inserted in the Union rules from the outset, covering "persons acting for journalistic purposes".

Market rigging can be done by 'talking-up' a stock to encourage demand, thus increasing the price of shares so they can be sold at a premium - by circulating rumours of new sales contracts or a rich seam of untapped oil or gold, for example.

Alternatively, damaging information can be spread about a company, thereby suppressing a share price so that stocks can be bought more cheaply and sold later when the price recovers. Recent cases have highlighted the huge impact press coverage can have on markets and the behaviour of investors.

The editor of UK-based tabloid The Mirror, Piers Morgan, was widely criticised after investing in stocks tipped by the paper's 'City Slickers' reporting team, before the article in question was published.

The shares in a telecom company increased in price as Mirror readers clamoured to buy them and Morgan reportedly doubled his money on the deal. (He later donated his profits to charity and the column was axed.)

Meanwhile, The Washington Post this month exposed market manipulation on a huge scale in China - aided by corrupt journalists working with organised crime gangs.

This threatened a crisis of confidence in the countries' two stock markets in Shanghai and Shenzhen.

Financial journalists covering stock markets could be held criminally liable for the publication of stock tips and market analysis if new EU rules are approved, European publishers have warned.