Just over a year ago the Takeover Panel castigated Financial
Dynamics for its actions on behalf of Amec in fighting off a hostile
bid. It is also the subject of a DTI investigation into possible insider
dealing in the shares of client Caradon. Yet the firm seems to have
suffered little damage - indeed it remains one of the City’s most
successful PR firms.
This time it was Citigate for leaking information on steel casting firm
William Cook, the proposed takeover target for its client Triplex
And media speculation is once more rife about stricter regulation of
financial PR firms.
A major obstacle is that the sector is split into two camps. One side
feels further regulation is unnecessary, arguing that there are clear
regulations laid down by the Stock Exchange’s ’Yellow Book’, the
Takeover Panel’s ’Blue Book’ and 1980s legislation; The Companies Act
and Financial Services Act.
Lowe Bell’s Piers Pottinger believes restrictions on financial PR have
been gradually but distinctly tightened, while Merlin’s Paul Downes
says: ’There are natural controls as stockbrokers won’t work with
But some high profile City PR people, including Shandwick chairman Lord
Chadlington, believe tighter regulation is long overdue. They argue that
financial PR will never be taken as seriously as other professions in
the City until it has a comparative regulatory framework.
Concern over the damage to financial PR’s reputation caused by media
scandals has led the IPR’s City and Financial Group to focus its
energies on the issue. The group’s deputy chairman Paul Kafka says: ’The
trouble with saying the present rules are adequate is that it fails to
recognise that unlike other professions, PR is not a closed shop. Anyone
can do City PR and it leaves us open to criticism.’
In the autumn of 1996, the group unveiled a consultative document
entitled ’The regulation of financial PR: A route towards best
practice?’, based on the assumption that unless something is done from
within, the government may step in with punitive legislation.
It recommends creating a central association comprising members of the
financial PR industry, its governing bodies (the IPR and PRCA), leading
City regulators (Stock Exchange and Takeover Panel) and representatives
from the Treasury and the DTI. This self-regulator would establish a
single code of conduct and an examination to accredit City PR
Kafka argues: ’During the heat of a takeover battle it is sometimes
easier for the PR adviser to say ’OK’ to a client request, rather than
saying ’sorry that action would go beyond our code of ethics.’’
So how have things moved on since the document? ’They haven’t really,’
says Kafka, ’although we did get the endorsement by the Association of
British Insurers in December.’
He says the initiative needs to be taken on by the City establishment -
the Takeover Panel and the Stock Exchange. However neither body seems to
see it as a priority.
’We have criticised activities in specific cases, but regulation is
outside our remit,’ says Alistair Defriez, director general of the
And Kay Dixon, media relations manager at the Stock Exchange, says: ’We
are in favour of regulation but don’t have the authority, legislative or
otherwise, to enforce it.’
And what about changing the listings rules so firms could only use PR
advisers accredited by a regulatory body? ’This request would need to go
to the board of the Stock Exchange and to my knowledge we haven’t been
formally approached,’ replies Dixon.
So change, it seems, is a long way off. And yet those outside the PR
agency world suggest there is no room for complacency. Bill Staple,
senior corporate financier at NM Rothschild, says: ’The only time City
PRs are subject to scrutiny is when they are involved in bids. A
self-regulating body is needed like the Law Society or the Institute of
There should be compulsory membership and disciplinary powers to drum
out those who break the rules.’
Stephen Jolly, director of corporate communications at Japanese
investment bank Nomura International takes a more critical stance:
’We’re acutely aware of the need for confidentiality. I have noticed a
weakness in the PR business in the way it draws up legal
He also questions the training of staff put on bids: ’Our business is
full of energetic and focused professionals. The risk awareness among PR
consultancies seems less developed.
’Because of comparatively low overheads it is easier for PR advisers to
go into business and proliferate. I still haven’t found a PR company who
has really understood our business,’ he says.
Jolly thinks closer self-regulation is a step in the right direction,
but Anthony Carlisle, chairman of Dewe Rogerson, disagrees: ’It is
comforting that where firms have broken the rules, action has been taken
by the Takeover Panel,’ he says, adding that the question is not one of
regulation, but of compliance: ’One should ensure that people within
companies are aware of rules that exist. Advisers work as part of a team
and if anyone has any doubt it’s not difficult to ask.’
DR has a compliance officer as a point of reference for anyone who is
unclear about rules, but Carlisle admits he doesn’t know how many other
PR companies use this resource.
The question remains: who really keeps a watchful eye?