UK: Market Abuse: Could It Happen Here?

It is not altogether surprising that the regulatory authorities should occasionally have journalists in their sights, given the impact press and TV reports can have. A good illustration of that impact was given by Anatole Kaletsky in The Times on 3 December 2002. He described an article of his in The Times which helped cause a run on a foreign bank, following an interview with the Chairman of a multi-national company and foreign industrialists’ association. The Chairman denied the remarks attributed to him (although a total of five journalists were present, including some who recorded his remarks for radio and TV).

Fears expressed generally by journalists about market abuse include the following:

• If the market moves on rumour, and a newspaper publishes a report on that basis – could that be ‘false and misleading’ information? (True stories are often denied.)
• Alternatively, if the market moves following publication of a newspaper article, and the FSA is suspicious, could it ask the journalist to disclose his source? (The FSA has the power to do this but has suggested it would be unlikely to use it.)

The Code (MAR 1.5.15) says behaviour will constitute market abuse where a person disseminates information which is, or if true would be, relevant information; the person knows, or could reasonably be expected to know, that the information disseminated is false or misleading; and the person disseminates the information in order to create a false or misleading impression (this need not be the sole purpose for disseminating the information, but must be an actuating purpose).

A factor to be taken into account in determining the purpose of the person in question is whether that person has an interest in a qualifying investment or relevant product to which the information is relevant.

Hence, it would seem unlikely that, if a journalist did not intend to create a false or misleading impression and had no interest in the product in question, he would commit an offence.

However, the Code (MAR 1.5.16) says the absence of an interest "does not conclusively demonstrate that the behaviour does not amount to market abuse". So it is conceivable that the FSA could argue that a journalist who did have an indirect interest in the company he was writing about, and could reasonably be expected to have known that the information he wrote was incorrect, was guilty of market abuse.

Perhaps more worrying is that it might lead to enquiries designed to elicit information about the journalist’s sources.

Alternatively, if it thought a story was suspicious, the FSA might pursue an enquiry which otherwise it would quickly conclude, because the journalist concerned flatly refused to answer any questions about it. Such an enquiry would cause disruption and expense for the journalist and his employers.