COMMENT: EDITORIAL; Time for clarity in financial PR

At his end of campaign party at the Cafe Royal this week, Sir Rocco Forte bravely insisted that Forte had won the argument if not the battle. But the argument did not convince the people that really mattered.

At his end of campaign party at the Cafe Royal this week, Sir Rocco

Forte bravely insisted that Forte had won the argument if not the

battle. But the argument did not convince the people that really

mattered.



Above all, this bid revealed the power wielded by institutional

investors. But it once again highlighted the crucial role played by

financial PR and investor relations practitioners in influencing the

outcome.



This demonstration of ‘PR power’ comes at a time when there are renewed

calls for the regulation of financial communication. But it is a

famously difficult task. Even an apparently simple thing - like defining

price sensitive information - is tricky. It depends as much on the

circumstances as the content of the message. And even then the ‘price

sensitivity’ of some information may only become clear with hindsight.



Nor are the rules, such as they are, easy to police. In the absence of

any proper regulatory framework, the City authorities simply burn the

occasional miscreant as an example to others. Building up a body of

‘case law’ in this way might help establish clearer definitions of

acceptable practice. But it is still deeply unsatisfactory. For one

thing, the penalties amount to little more than a ticking off -

although, given the muddiness of the waters, it would be difficult to

argue for harsher measures.



But there must be an attempt made to introduce a regulatory framework

which will make it easier to prevent deliberate, rather than accidental

abuses. Statutory regulation would be unwieldy, and possibly

unenforceable. A form of self-regulation must be the way forward,

although none of the existing industry bodies seem ideally positioned to

make it work.



But it should be possible, with the backing of the City authorities, to

set up a register of financial PR and IR advisers. Banks, brokers and

fund managers - and clients - would then be encouraged not to deal with

consultancies which are not registered.



The members of such a register would have to abide by a code of

practice, vigorously policed by a commission of their peers, and

representatives of key City bodies. Its status would be somewhat like

the Press Complaints Commission, and its ultimate sanction would be

removal from the register.



Trying to regulate financial communication is like trying to scoop water

in a sieve. But try we must. For one thing is certain, the current

situation is intolerable. The absence of clear rules and enforcement is

to no one’s advantage, and leaves financial PR and IR practitioners

dangling in the wind.



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