Current ‘Libor’ regulation is a threat to financial journalism
Financial reporting could fall under the scope of the proposed Libor regulation on financial benchmarks, undermining the role played by journalists. EU regulators must recognise this and exempt the media from the regulation, writes Angela Mills Wade.
Angela Mills Wade is the executive director of the European Publishers Council (EPC).
In the nearly 30 years that I have been lobbying in Brussels on EU media policy, there have been numerous draft laws and regulations that would have had unintended consequences for the media sector without the necessary changes – and frequently consequences that would have undermined press freedom in Europe.
There is always a balance to be struck, of course, to safeguard different interests, but press freedom and freedom of expression are both fundamental principles for a democratic society that are enshrined in the laws of the European Court of Human Rights. As such, they must always be protected.
Once again we in the media find ourselves faced with a draft EU regulation designed to achieve one thing but that unwittingly poses a serious threat to the media: specifically to financial journalism and to journalists’ right to protect their sources. Every media that publishes or broadcasts financial information, every journalist who reports on finance and every consumer who relies on the media for their financial information should sit up and take note.
The regulation in question is the draft EU Regulation on Benchmarks that laudably sets out to restore confidence in financial benchmarks (indices used as a reference price for financial instruments, contracts or to measure the performance of an investment fund, for example) following the LIBOR and EURIBOR scandals.
Unfortunately, as it currently reads, financial information reported by journalists could fall under the scope of the Benchmark Regulation if this information is subsequently used as a benchmark – even if the journalist researching and reporting this information is unaware that it is being used in this way.
Obviously the media cannot determine what uses are made of the content they publish and certainly cannot tell their readers what to do with the content they receive, as the Benchmark Regulation inappropriately would require them to do. We deplore the LIBOR and EURIBOR benchmark scandals, but we must be clear that they arose because of the clear conflicts of interest that were present. The media does not have these conflicts. The press is independently funded and our revenues are not related to how financial markets move. This is a fundamental distinction. Not only that, but as currently worded, this Benchmark Regulation will seriously undermine the relationship between journalists and their market sources and threaten the role that journalists play in bringing transparency to financial and commodity markets by providing independent information to the public and European industry.
To clarify, if a journalist reports on or refers to a benchmark already provided by or reported by someone else, they would be exempt from this Regulation. But as soon as a journalist produces their own financial information gathered from their own sources – which is subsequently then used as the basis for a benchmark by their readers or users – they would then be subject to this law. Among the consequences of this would be that the media company they work for would become regulated by a financial services regulator, journalists would be required to police their sources and report suspected abuse to regulators and they would no longer be able to report prices from traders in front offices. The whole relationship of trust between journalists and their sources would be undermined.
The only way around this at the moment would be that, every time a newspaper or magazine publishes information that could be used as a basis of a contract, the publisher must notify the European Securities Markets Authority (ESMA) that it does not consent to that information being used as a benchmark. Impractical. Unreasonable. Damaging to all concerned. It will ultimately lead to a de-facto monopoly around “regulated” entities if the media can no longer present financial information, and will set a dangerous precedent whereby the media can no longer report on financial and commodity markets. To be clear, there are already sanctions against financial journalists who willfully mislead or act for personal gain.
In an opinion obtained this week from three leading UK lawyers led by The Honourable Michael J Beloff QC, the media is advised that the draft EU regulation would be unlawful and therefore vulnerable to challenge in the European Court if adopted in its current form without an exemption for the media.
Our MEPs do have the opportunity to clear this mess up. On 17 February, the Economic and Monetary Affairs committee meets to discuss the draft. Along with other leading media organisations in Europe (the European Alliance of News Agencies, the European Newspaper Publishers Association, the European Magazine Media Association, the European Federation of Journalists and the European Business Press association), we in the European Publishers Council have been explaining these unintended consequences to those responsible for drafting, scrutinizing and ultimately adopting this Regulation.
We are confident that MEPs will understand the inappropriateness of – for the first time in Europe – extending financial service regulation to journalism and that they will instead vote to protect the vital role that journalists play in bringing transparency to financial and commodity markets. After all, this is exactly what their predecessors did in 2003 in the very similar circumstances of the Market Abuse Directive, and which has been reconfirmed in the draft Market Abuse Regulation now in the process of finalisation.
Adopted in early 2003, the Market Abuse Directive (MAD) introduced a comprehensive framework to tackle insider dealing and market manipulation practices, jointly referred to as "market abuse". Back then we found ourselves in very much the same position as we do now – fighting to protect the right of journalists to report freely and without control by financial regulators. We won an exemption for the media and their journalists following similar discussions between regulators and the media and resulting in the agreement that in any democratic society and market economy, regard must always be to the fundamental right to receive and impart information freely without State interference in accordance with Article 10 of the European Court of Human Rights.
In April the full European Parliament will put the Regulation to the vote in Plenary. We trust that all EU regulators will recognize the importance of an immediate media exemption as being in the interests of consumers, publishers and journalists alike.