The Media Column: 'It's a MAD world if we can't report financial rumour and hearsay'

The European Union, which has taken several decades to sort out its own initials, has clearly still not got to grips with the dangerous world of acronyms. With the press hardly likely to approve of its draconian planned directive over financial journalism, it might have thought harder before naming it the Market Abuse Directive. But MAD it shall be called, and worse than mad in the view of editors it is likely to be.

MAD – and here it lives up to the acronym – could punish journalists for reporting in good faith financial information that later turns out to be inaccurate. Indeed, at its worst it would in effect stop the reporting of rumour and hearsay on the grounds that if it is false, the reporter becomes a conduit for market abuse.

Rarely can there ever have been such an insight into the rose-tinted world of the EU, where contacts always give a journalist accurate information. The real world of the markets, let alone financial journalism, is a mixture of fact, speculation, research, rumour, hearsay, informed betting and guessing.

At least the EU is beginning to see sense. An early draft of the directive threatened to jail journalists for reporting misleading financial information that resulted in moves in the money markets. Now reporters will only be liable if they make a profit as a result of movement in share prices. In addition, journalists now cannot be convicted unless they knew – or there was evidence to suggest they knew – that the information was misleading. In other words, the EU has agreed that a reporter cannot be punished for a simple transcription error. But it is alarming that originally it was prepared to do exactly that.

Another proposal is that financial journalists will have to declare their own financial interests. Here, MAD may not be quite so mad. While financial journalists take umbrage at this possibility, other reporters and, more importantly, readers might not think it too unreasonable. There is, let's face it, a history of city editors and the occasional newspaper editor publishing share tips that were advantageous to their own portfolios.

But it is hard to see how MAD's main proposal – of punishing financial journalists for reporting hearsay and rumour – can happen in practice without inviting ridicule. Let's think what would happen if we all bowed to MAD and stopped reporting financial gossip. You would have a situation where the professionals know why share prices are going up and down, and the amateur investors don't. What sort of service would a newspaper be giving its readers then?

At best MAD highlights a legitimate clash in the area of public interest: on the one side the pursuit by the regulators of market abuses, such as insider dealing, and on the other the freedom of the press to enlighten its readers about a complicated and technical world where rumour and hearsay are part of the stock in trade of the main players. But in that conflict of interests it is clear where a newspaper must stand if it cares about explaining not just the City, but the jungle of personal investments to its readers.

It is impossible, of course, to divorce MAD from the Interbrew case. Today, the editors of five news organisations – The Independent, The Guardian, The Times, the Financial Times and Reuters – will be speaking at a conference on those topics.

In the Interbrew case, all those news organisations received anonymous information that a takeover of the Belgian brewer was about to happen, and published stories based on that information. The company tried in the courts to force the news organisations to hand over documents. It finally backed down, though the Financial Services Authority's interest in investigating the leak itself could in practice renew that threat.

With both the Interbrew case and the Market Abuse Directive hovering over Fleet Street, this week's meeting is one of the most important gatherings of editors ever for the future of financial journalism. It's a lot less sexy than other matters obsessing the press in the last week, but it has infinitely larger implications for the day-to-day job of reporting.

d.lister@independent.co.uk

The Financial Reporting Conference takes place today at the Guardian and Observer visitor centre, 60 Farringdon Road, London EC1 (020-7713 4779)