Employees’ financial interests

A regular commenter on press freedom in the U.K., philosopher Baroness O’Neil, told the Leveson inquiry in 2012 that journalists and editors should fully disclose their financial, commercial and property interests. In short she said; “We expect other people in life to be open about the property they own, open about the political issues they support [and so should journalists].”

It is an excellent point about how financial journalists need to be transparent and above reproach if they are writing about matters which can affect a stock price or their own financial interests in any way.

There are two key points to consider: journalistic ethics, on one hand, and legal issues on the other. Ethics require that journalists be careful and transparent if they cover anything that could affect their own financial standing. On the legal side, every country has rules against insider trading; at some point most financial journalists are going to come across news that is not widely known and will affect a stock price.

There is always the option of not reporting if there is a conflict. NPR offers excellent advice on when to disclose any holdings and when to recuse oneself from coverage:

“All NPR journalists … must tell our supervisors in advance about potential conflicts of interest. When first assigned to cover or work on a matter, disclose to your immediate supervisors any business, commercial, financial or personal interests where such interests might reasonably be construed as being in actual, apparent or potential conflict with our duties. This includes situations in which a spouse, family member or companion is an active participant in a subject area that you cover. In the financial category, this does not include an investment by you or your spouse, family member or companion in mutual funds or pension funds that are invested by fund managers in a broad range of companies (unless, of course, the assignment concerns those specific funds).”

The Globe and Mail’s Editorial Code of Conduct includes a lengthy explanation of business ethics, which extends not only to all editors and reporters in the financial section, but also to all senior managers and anyone who might have information that could affect a stock price. A columnist who writes about any stock must disclose any holdings in that column.

Here’s what it says: “The general principle: No one should benefit personally from knowledge obtained as a Globe and Mail employee until that knowledge is in the public domain. In situations of doubt, you are asked to discuss the issue with your editor or with the independent adviser.”

As referred to above, The Globe asks all business journalists and senior managers to provide all information on their holdings to an outside party — a retired investment adviser — who can then act as a private adviser and a check and balance.

The Associated Press’ News Values & Principles includes these points:

“Associated Press employees who regularly write or edit business or financial news … must not own stock, equities or have any personal financial investment or involvement with any company, enterprise or industry that they regularly cover for the AP. Staff members who are temporarily assigned to such coverage or editorial duties must immediately notify a manager of possible conflicts to determine whether the assignment is appropriate. If necessary, employees might be asked either to divest or to suspend any activity involving their holdings.

“Editors and writers who regularly cover the financial markets may not own stock in any company. They may invest in equity index-related products and publicly available diversified mutual funds or commodity pools.

“Financial news employees must also avoid investment activities that are speculative or driven by day-trading or short-term profit goals because such activities may create the impression that the employee is seeking to drive market factors or is acting upon information that is not available to the public. …

“All employees must comply with federal and local laws concerning securities and financial transactions, including statutes, regulations and guidelines prohibiting actions based upon ‘inside information.’ All employees are reminded that they may not act upon, or inform any other person of, information gained in the course of AP employment, unless and until that information becomes known to the general public.

“Employees should avoid any conflict of interest or the appearance of a conflict of interest in the investments and business interests of their spouses or other members of their household with whom they share finances. They are expected to make every effort to assure that no spouse or other member of their household has investment or business interests that could pose such a conflict.

“Employees should be aware that the investment activities and/or financial interests of their spouses or other individuals with whom they share financial interests may make it inappropriate for them to accept certain assignments. Employees must consult with their managers before accepting any such assignment.”

Reporters covering ordinary news stories are not likely to come into conflict situations because of their financial holdings. Issues can arise, however, if a reporter finds out inside information. In that case, the reporter should either not have tradeable stock, should pass the story to another reporter or should disclose her or his holdings to a supervisor.

The main author of this section is Sylvia Stead, of the Toronto Globe and Mail.

Additional Resources
BBC Financial Journalism Guidelines
Editors’ Code of Practice Committee (UK): Guidance notes on financial journalism