Stock Ownership Policies are Toughened for Business Journalists

By Jennifer Hopfinger
January 30, 2004 12:58 PM

The resignation of CBS MarketWatch commentator Thom Calandra comes amid growing scrutiny of stock ownership policies at business publications.

CBS MarketWatch issued tougher stock trading rules for its employees on the heels of Calandra's resignation, requiring greater disclosure and stricter enforcement. The move could spur other financial publishers to enact similar measures in attempt to avoid conflicts of interest.

Under the company's new rules, which went into effect Jan. 26, reporters can't own securities in any company or industry they cover. Columnists, however, may write commentary about stocks they own, but they must disclose that information in the article, and they can't buy or sell shares of the stock for five days after the article is published.

Dan Silmore, a spokesman for CBS MarketWatch, said the company had been considering policy changes for many months as it branched into new areas of business, such as subscription newsletters like Calandra's.

"As a company, we have a legitimate business interest in having a policy that works," Silmore said. "But obviously, the news on Calandra's resignation caused the process to be accelerated."

Under the old rules, reporters were required to inform editors if they owned a stock they were about to cover. Whether the reporter would continue with the assignment was handled on a case-by-case basis. If they did cover the stock, they provided disclosure. If journalists had knowledge of an upcoming article about a stock, they had to wait 48 hours after publication before trading that stock.

The new policy requires that journalists, columnists and senior management hold securities of any investment purchased for a minimum of three months. After the three-month holding period has passed, and they have knowledge of an upcoming article about a stock, they must wait five days after the article is published to trade that stock.

The editor-in-chief and managing editors can't own individual securities of any company, other than that of their own employer, MarketWatch.com.

Furthermore, the new rules require that employees record their stock trades in an investment register with the company. For journalists and senior executives, the company will conduct random audits to verify their trading. Employees must then turn over official trading records from their brokers if the company requests them. If they refuse, they face possible termination.

While different media organizations have different ethics policies regarding stock ownership, the enforcement of those policies to such a high degree is rare. Most do restrict the stock trading of their employees to some extent.

The New York Times and Dow Jones, publisher of The Wall Street Journal, prohibit newsroom staff from owning shares in companies they cover. In most cases, journalists at the Journal must hold any security for a minimum of six months.

At news provider Reuters Group, reporters must notify an editor when reporting on a company in which they own stock. They also cannot trade in that security for a month after the assignment.

TheStreet.com goes further than most -- editorial staff members can't own any individual securities, except stock in the TheStreet.com.

In January, CNBC followed the TheStreet.com's lead. Under the company's old rules, CNBC employees could own individual stocks as long as they held them for at least four months. The company required on-air personalities to disclose any personal stock holdings whenever they mentioned the company on air. Under the new rules, CNBC will require its news staff and management to either liquidate all holdings of individual stocks by the end of this year, or place them in a blind trust. Employees can own mutual funds and stock in CNBC's parent company GE as long as it is part of a company investment plan.

Jane Kirtley, a media ethics professor at the University of Minnesota, believes more publishers will revamp their policies, but cautions that an all-or-nothing approach may bring its own negative consequences.

"It's very important to avoid conflicts of interest, but publications can overreact," Kirtley said. "It's reasonable to say that you can't write about Coca-Cola if you own stock in Coca-Cola, but to say you can't own any stock is unrealistic and may be difficult to enforce."

At the very least, she said, journalists may not want to work at companies with the stricter policies.

The Society of American Business Editors and Writers states that, at a bare minimum, business journalists should avoid both active, short-term trading and taking advantage of any information before it's widely disseminated.

The Securities and Exchange Commission has never taken a position on what journalists should be allowed to do with their investments, leaving them subject to the same anti-fraud provisions as anyone else.

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Copyright © 2008 Donald W. Reynolds National Center for Business Journalism