City & Corporate: The rumour mill is as rife as ever

The Financial Services Authority has told the stockbroking firms it regulates that they must have a documented policy on rumours. My informant did not tell me the details - only that the compliance manual must be updated to include the policy. Given that the most commonly used expression in the financial PR manual must be 'we do not comment on market rumours', it should be a gripping read.

Rumours are the knife crime of the financial world. The Met said last week that the current reported level of knife crime is the same as it was ten years ago, but such an inconvenient truth is neither going to change popular perceptions nor stop media hysteria.

It is the same with stock market rumours. A few weeks ago there was a rumour-driven bear raid on HBOS that caused a sharp drop in the shares. There is no evidence at all that there are more today than in the past, but that is not going to stop the anti-rumour bandwagon.

In days gone by, it was common practice when someone was investigated for insider dealing to say that they bought (or sold) the shares in question because of something they had read in that day's Evening Standard. The serious cases would in those pre-FSA days be investigated by Department of Trade and Industry inspectors, and eventually I or the market reporter would be summoned to appear before them. We would then be cross-questioned about a story that might only have been one paragraph in the market report some two or three years before - and interrogated about who the source was.

Even if one had wanted to reveal a source, it was impossible to remember, and often with market rumours there is not just one source anyway. Inspectors never believed this.

And this is where PR came in. Whenever the questioning got too tough, one of my colleagues would 'recall' the source was a PR man called Eddie Protheroe. Only later when the inspectors went after him would they discover that Eddie had recently passed away.

I doubt if this has changed much.

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