Insider trading laws to apply to media

New laws aimed at combating insider trading due to become effective next month will place new disclosure obligations on the financial media.

The European Union Market Abuse Directive is set to be implemented in early July by the Department of Enterprise Trade and Employment.

Its primary objective is to combat insider trading and other market abuses through the creation of new offences and the implementation of a system for the investigation of alleged breaches by the Irish Financial Services Authority.

The financial regulator will be empowered to impose sanctions.

The scope of the regulations will include media businesses and also journalists that make recommendations about financial instruments. However, this aspect of the new regulations may not become effective until October.

The identity of the journalist making the recommendation will have to be disclosed as will any conflicts of interest they or the media organisation may have. The writer will also have to adhere to a basic standard of fairness.

However, if the financial regulator deems the media outlet or journalist to be subject to an adequate self-regulatory regime that arrives at the same outcome, then the journalists will be exempt from the regulations.

The new directive also involves regulations on the dissemination of third party recommendations - such as stock broker research - by the media. The main point is that the identity of the person disseminating the recommendations has to be disclosed.

In addition, any summary of a third party recommendations will have to meet defined standards of clarity, must not be misleading and should make clear where any disclosures relating to the source document are available for access by the public.

Other requirements will apply to the disclosure of third party recommendations in situations other than news reports and if the substance of the recommendation is altered.

They include disclosing the substance of any alteration and if there is a substantial change in direction - for example, from sell to buy - then the identity of the person changing the recommendation must be disclosed along with any conflicts of interest.

Séamus Dooley, the Irish Secretary of the National Union of Journalists, said the union would have reservations about any legislation that might interfere with the confidentiality of sources, but was in favour of the disclosure of conflicts and interests by journalists.

He said the NUJ believed that its own code of conduct was sufficient for it to qualify as a self-regulatory body as envisaged in the proposed legislation. He added that the NUJ would be meeting Ifsra to discuss the directive shortly.