Journalists 'must face scrutiny' over investment advice

Journalists should be included under the definition of investment advice providers in new securities law, according to a group of stockbrokers and investment banks.

ABN Amro, ASB Securities, First NZ Capital, Forsyth Barr, Goldman Sachs JBWere and Macquarie Equities made this point in a submission to Parliament's commerce select committee considering the Securities Legislation Bill.

They say the definition of "investment advice and advice" should be amended to include recommendations, opinions or guidance given by journalists on investment opportunities.

Therefore, the exclusion for journalists from investment advice disclosure law should go.

"Where a journalist provides comment about a particular investment and the content of that article includes a recommendation, opinion or guidance that may result in the acquiring or disposing of (or not acquiring or disposing of) securities then the journalist should be required to make certain disclosures," the submission says.

Disclosures could include whether the journalist has an interest in the investment and/or receives any form of remuneration from the company(s) mentioned in the article.

Another submission, from Paul Hocking, the executive director of the Institute of Finance Professionals (INFINZ), says the bill is "silent" on short selling. Therefore, it is unclear whether short selling would breach the proposed rules on market manipulation or be viewed as legitimate trading activity.

INFINZ and the market participants want the bill amended to make a clear exception allowing short selling.

Another submission, from the Institute of Chartered Accountants' government relations director David Pickens, says an exception in the bill to insider trading rules for agreements covering the underwriting of share offers should be extended to include private share placements.

Pickens says private placements are often used by issuers seeking to raise extra capital and, by necessity, usually involve the disclosure of inside information. The prospect of a private placement itself is probably inside information as is subscription for shares by the placee on the basis of that inside information.

Introduced to Parliament last November, the bill aims to build confidence in the securities markets. It broadens the definitions of insider trading, introduces criminal remedies and increases civil penalties. It also outlines new market manipulation laws.

It will be reported back to Parliament by June 15.