Despite the general lack of concern shown by some City PR firms
about the Financial Services Authority regulations set to come in to
force next month, the sector needs to recognise the size of the
challenge facing it. Under the FSA's stiff new rules on market abuse, it
is not necessary for the body to prove in a criminal trial that insider
trading has taken place, just that a reasonable person would infer as
much. Unlimited fines may follow.
There are key steps financial PR firms should be taking - indeed should
have been taking since the implications of the FSA code first became
clear a year ago. Because the whole basis of the work they do is to
protect shareholder value - in stark terms, to manipulate markets - they
are going to need to be able to defend themselves when the regulator
comes knocking.
For a start, the sharper practices of City PROs will have to end, if
only to convince the FSA of the general trustworthiness of the sector
and buy some much-needed goodwill. The bell tolls clear for the Friday
night drop.
It is hardly a romantic rallying cry for the future of City PR, but
compliance and audit issues are also key. Agencies need to put in place
mechanisms to ensure both that they are not engaging in market abuse,
and that they can demonstrate as much. On the former, larger agencies
may need a compliance officer to guarantee they do not fall foul of the
first real attempt to regulate the sector's activities. On the latter,
when appealing against the expected flood of early negative FSA
decisions, some paper trail of valid decision-making will be
crucial.
The costs associated with putting in place these changes need not be
high, and if any part of the PR sector has wide enough margins to take
the hit, it is the Square Mile. Even for those with shrinking margins
due to the downturn, this is preferable to the prospect of unlimited
fines being levied by the FSA watchdog.
