FSA imposes City-wide gag order on banks and brokers

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The Independent Online

The Financial Services Authority has imposed a City-wide gag on regulated firms' communications with the media. In its latest "Market Watch" issued to all City firms, the watchdog warned that their "internal policies should require all initial media enquiries received by a regulated firm's staff to be immediately directed to the firm's media relations team".

It continues: "All non-media-relations personnel at regulated firms should be prohibited from directly responding to any initial enquiry from the media, regardless of seniority."

While this does not count as formal "guidance", the status in Market Watch as a recommendation could result in firms facing heavy fines if they fail to comply. Under the FSA's "principles-based" regulation, failure on the part of a financial firm to act on recommendations like this can, in the event of an investigation into their conduct, lead to immediate disciplinary action.

The crackdown counts as one of the FSA's most heavy-handed intervention into the City's relationship with the media since the notorious "Interbrew" affair, several years ago. That situation found Sir Howard Davies, the FSA chairman, planning to send officials into newspaper offices – including those of The Independent – to seize leaked any documents which suggested the Belgian brewer was preparing a bid for South African Breweries.

It caused uproar, with the newspapers arguing that an English court judgment requiring them to hand over the documents breached their freedom of expression. The fight went to the European Court of Human Rights until Sir Howard backed down.

The guidance also establishes a set of rules on how conversations between journalists and regulated firms – including all banks and brokers – are conducted. The FSA said the guidance followed a series of leaks, "often closely preceded by telephone conversations between insiders occupying senior roles on a corporate transaction, and the journalists who published those reports".

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