Financial PR: Regulation returns to haunt City PR agencies - Last week the Takeover Panel rapped Citigate for leaking confidential information on a client’s takeover target, leading to renewed calls for regulation of City PR firms

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.

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

Lloyd.



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

wayward consultants.’



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

practitioners.



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

Takeover Panel.



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

Chartered Accountants.



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

arrangements.’



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?



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