Investment Disclosure Becomes Issue of Interest for Financial Publications

Recent scandal has led many in the financial media to stress the importance of stringent regulations on journalists' investment disclosure.

On Jan. 10, the Securities and Exchange Commission settled civil fraud charges against MarketWatch columnist Thom Calandra. The SEC said Calandra profited by $400,000 when he sold stocks shortly after recommending them in his newsletter.

Ten days later, Calandra resigned from his MarketWatch.com chief commentator position.

"Calandra betrayed his readers' trust by surreptitiously using his newsletter, The Calandra Report, to bolster his personal trading profits," said Helane L. Morrison, district administrator of the SEC's San Francisco office, in a release. "Calandra's readers were entitled to know about his trading activity, so that they could evaluate the credibility and impartiality of Calandra's investment advice for themselves."

MarketWatch policy states that if a reporter is assigned a story about a company in which he holds stock, he must receive approval from the editor in chief or a managing editor and disclose the financial interest if he is permitted to continue working on the story. Staff columnists are not permitted to write about stocks in which they invest, but guest columnists may if they disclose the information.

Other publications have stricter policies in place for employees.

At The Washington Post, financial reporters must fill out disclosure forms once a year, said Jill Dutt, assistant managing editor for financial news. The forms list stock, bond and mutual fund holdings, but reporters need not include dollar values.

"If the holdings change significantly during the year, they must file an update with me," she said.

If a Post reporter owns stake in a company, he cannot cover that company. Columnists who write about companies in which they own shares must disclose their financial holdings to readers, Dutt said.

"Full disclosure is essential," she said. "We expect it of our sources; we demand it of our journalists."

Writers for The Motley Fool must disclose ownership at the end of stories about stocks they hold, and employees must publicly disclose their stock holdings on their personal profile pages at Fool.com.

Financial news site TheStreet.com has one of the strictest policies against the appearance of bias in its reporting. Editorial staffers may only hold stock in TheStreet.com, Inc., aside from mutual funds.

But "reporters whose beat covers a particular industry are not permitted to hold shares in closed-end or exchange-traded mutual funds that are primarily focused on that industry," the policy states.

Copyright © 2009 Donald W. Reynolds National Center for Business Journalism