When I worked as a markets and business correspondent at Bloomberg News, the rule was clear: you were not allowed to report on any company in which you held shares, mutual fund holdings excepted. That seemed to me a sensible rule, because it eliminated any possible conflicts of interest.
Fin24.com, one of our premier financial media organisations, has a different rule. Reporters have to declare their holdings in a companies that they report on. But is that enough?
Having read Marc Ashton’as report on the performance of South Africa’s big four banks, I have my doubts. The report is headlined “Standard Bank tops”, and the lead states:
“Standard Bank has come out as the clear favourite among South Africa’s big four retail banks after the release of their respective results for the year to end-December 2008. ”
It then compares the financial results of the four banks, and from the comparison it seems clear to me that Absa was, in fact, “tops”. It performed better than Standard Bank at earnings level, and declared an increased dividend while Standard’s remained unchanged. So why is the writer punting Standard? On the basis of three portfolio managers’ opinions that Standards Bank’s results, given the context of its international exposure, represented the best performance out of the four banks. Now the three portfolio managers in question are highly competent people, and I don’t doubt their integrity – but at the same time, I don’t know what shares they hold. They may be talking their books, as they say in the industry (Bloomberg News had another good rule: when quoting a portfolio manager, you had to say whether or not he held or had recently bought or sold shares in the company he is commenting on).
Then, at the end of the report, we are informed that Ashton holds preference and ordinary shares in Standard. Does that change my evaluation of his story? You bet it does.
Ashton is a good business journalist, and I regularly read his reports on Fin24.com. I have no reason to doubt his integrity either, and at least he is telling me that he has an interest in the company he is reporting on (I’m sure many business journalists don’t). But still… I would have taken him so much more seriously if I knew he didn’t have shares in any of the four banks. I may even have bought his opinion that Standard Bank came out tops. As it is, I’ll trust my own judgment.