Firms need to stay tight lipped about what is happening mainstream in the business community, or else face the wrath of the FSA. This is the latest message from the Financial Services Authority about how to improve the integrity within the financial industry. A recent newsletter from the FSA, Market Watch, points out what is of particular importance about insider information, saying: “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.”
In an investigation conducted between 2008 and 2010, the FSA logged phone conversations between journalists and corporate lawyers on major deals to see if relevant information was being leaked. The results were conclusive.
“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,” remarked the FSA.
Regulators within the FSA, in an attempt to curb such knowledge from becoming widespread before a deal took place, said: “Firms must improve their systems and controls to ensure that contact with the media is appropriately handled to prevent market abuse from occurring.”
The FSA warned the industry that, unless improvements were made within the next year, it would consider making the recommendations for preventing leaks into formal rules.
Michael Skrein, head of the intellectual property group at Reed Smith, made a great observation, when he said: “You obviously need to have people following the law and rules on insider information and market abuse. But regulators have to take care to respect the fact that we live in a pluralist democracy where free speech is allowed and is indeed a human right under the European convention,”