THE EDITOR The Franca Tes Lite Nunbe one Souter Bdge FINANCIAL Landen SE SH aa Tel: +44 (0)20 7873 3000 Fe $48 (20 TTS 324 Internet psec Mr Hector Sants Chief Executive Officer Financial Services Authority 25 The North Colonnade Canary Wharf, London E14 SHS 11 October 2010 Dear Mr Sants, We, the undersigned, are writing to express our profound concems regarding the most recent set of best practice recommendations issued by the FSA's Markets Division as part of its ongoing “thematic work" assessing regulated firms’ approach to controlling leaks. These recommendations, set out in Issue No.37 of “Market Watch", dated September 2010, represent in our view a misguided response to the perceived problem of leaks that will only injure the market integrity they purport to protect. Properly functioning financial markets rely on the flow of accurate and timely information, available to all participants simultaneously. In the world of instant media, the pressure on journalists is to publish information ahead of anyone else. This information, in turn, is swiftly picked up by others. So the media, contrary to the assumptions underlying the recommendations, actually play a key role in protecting investors and other markets’ participant by inhibiting the creation of an unlevel and unfair market place due to the limited circulation of insider information. And the media's on-line services reach European investors, so helping create a level European playing field Under Recommendation 2, all media enquiries of any kind addressed to a regulated company will be directed to a firm’s media relations personnel, who will be required to review the enquiry to “decide if it potentially relates to inside information’, with a mandate to “err on the side of caution”. Conversations with the press will have to be recorded, or a note taker from a firm's media relations team will need to be present. The proposal that all contacts between journalists and regulated firms should become subject to a prior screening process is disproportionate and unacceptable, and should be corrected These proposals reflect a wilful misunderstanding of the relationship between the Gity and the press and will ultimately do more harm than benefit to the flow of reliable information, Regulated firms will find it much easier to hide behind bland press releases that conceal inconvenient corporate realities and there is a heightened risk that journalists will feel compelled to publish unconfirmed reports and rumours, increasing the flow of misinformation, Journalists and the media play a key role in maintaining a level playing field in the Agpske! by unearthing and disseminating information - including material that Fagus eon esr Ove Soutwar Bre andor 1 eee.FINANCIAL. TIMES companies seek to hide, obscure or spin. By adopting an overly prescriptive approach to preventing leaks, the recommendations would greatly restrict the capacity of the media to carry out investigations of regulated firms such as banks, asset managers and brokers. This has broader ramifications. As the credit crisis has underlined, these firms are key parts of the financial structure and economy and more public scrutiny of their transactions is required, not less. It is also far from clear that the recommendations will even achieve their stated objective. Individuals who want to leak information will always be able to find a means of doing so and the pian fails to adequately address strategic leaks. The US adopted Regulation Fair Disclosure in 2000 to prevent selective disclosure of sensitive information, in part to address the problem of leaks to analysis and the media, but the regulation has had litle measurable effect on reducing the amount of insider trading. Although the many pages of detailed recommendations are not meant to be interpreted as “FSA guidance’, the Markets Division nonetheless states in its Conclusion that it will be following up on the issues raised and makes clear that action will be taken where they “deem unacceptable practices have occurred” Compliance does not appear voluntary. As a final point, we would like to underscore our concern that these recommendations, although targeted at contacts with the media, have been drafted and issued without any prior consultation with the media, contrary to the Better Regulation Task Force - Five Principles of Good Regulation, published in 1997. For the reasons set out above we urge you to reconsider and revoke these recommendations. We also invite the FSA to enter into a constructive dialogue with the media. It is vital that financial journalism can continue its important role in informing investors and markets professionals and thereby contributing to the transparency and integrity of the UK's financial markets, Yours sincerely, Porn Th ae Oe Lionel Barber Editor, The Financial Times Alan Rusbridger Editor-in-Chief, Guardian News & Media ee David Schlesinger Editor-in-Chief, Thomson Reuters.FINANCIAL TIMES James Harding Editor The Times