FSA Chairman warns against selective briefing

Speaking at a business lunch, Mr Davies said that there have been a number of well publicised recent cases of apparently selective briefing of analysts, or in some cases the media.

He re-affirmed the FSAs commitment to enforce long standing rules that prevent selective leaking or briefing by listed companies. Under the FSA rules, price sensitive information which could significantly affect a companys share price must be announced to the market as a whole without delay:

In fast moving equity markets the timely flow of accurate information to investors is crucial. It is especially important in present circumstances given the large number of new small investors who have been attracted into equity markets in the last couple of years. This is a very welcome trend. But it could be set back if small investors believe that they are not allowed access to information on a similar basis to large institutions.

There is nothing more corrosive of market confidence than the feeling that some investors are deliberately excluded from an inner circle of privileged counterparties. And in addition to the positive benefits of a well-informed market, a rule of this kind helps reduce the scope for insider dealing, by getting price sensitive information quickly into the public domain.

These rules are set out in the FSAs UK Listing Authoritys Listing Rules and reinforced by its Guidance on the dissemination of price sensitive information, which gives practical guidance on what can be, and what should not be, covered in private briefings by companies.

This guidance is well understood by most companies, in our experience. Some have gone further and given investors access to their briefings or summarised the content of a briefing in an announcement. In our view, this is a welcome development, which others should consider emulating.

We plan, in the light of recent experience, to update this guidance and to publish a revised version early next year. But at the same time we shall actively pursue cases of suspected selective briefing where they are brought to our attention by our own monitoring or otherwise. We are not prepared to see the integrity of Londons markets compromised by this kind of behaviour. Companies, and analysts, should be in no doubt of that.

Notes for editors

1. Howard Davies was addressing a Bloomberg lunch in London. The full text of his remarks and the FSAs Guidance on the dissemination of price sensitive information are available on the FSAs website at: http://www.fsa.gov.uk/Pages/Library/Communication/Speeches/2000/sp61.shtml and http://www.fsa.gov.uk/pubs/ukla/index-1996.html

2. In his address, Mr Davies referred to the US Securities and Exchanges Commission new fair disclosure rule- regulation FD, which came into effect this week. There have been similar rules in the UK for some considerable time (in their current form, the rules have been in place since December 1993 but there have been rules aimed at preventing selective disclosure for over 30 years).

3. The UK Listing Rules, which the FSA inherited from the London Stock Exchange in May 2000, require that price sensitive information is announced to the market as a whole without delay. Price sensitive information must be notified to the Company Announcements Office (run by the London Stock Exchange) who release an announcement over the Regulatory News Service. When the Company Announcements Office is closed, companies are required to disclose price sensitive information to two newswire services operating in the UK, to not less than two UK national newspapers and to the Company Announcements Office for release when it reopens.

4. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; the protection of consumers; and fighting financial crime.

5. The FSA aims to maintain efficient, orderly and clean financial markets and help retail consumers achieve a fair deal.

Appended information

This speech is available from the publications section of our web site. The direct URL is http://www.fsa.gov.uk/Pages/Library/Communication/Speeches/2000/sp61.shtml.