What are the rules that govern financial public relations?

Like all really worthwhile activities, financial public relations should be a careful combination of the stylishly strategic with the timely tactical and as such should fit in comfortably with every other area of public relations activity. The real difference between financial public relations and its sibling sectors is the rules and regulations that govern it. While there are many areas of activity in which there are rules, it is difficult to think of any where there are so many rules and regulations about what can be said, when, to whom and for what purpose, which are drawn up in such infinite detail, while at the same time leaving so much room for interpretation, argument and misunderstanding.

Taking the London Stock Exchange as an example: the anxious frowns of company directors and their financial advisers do not only come from worrying about how to explain their pay increases to shareholders. In recent years, they have also become understandably anxious about what they can say about themselves, and when and to whom they can or should communicate. Changes in the market and reaction to abuses of information have led to the introduction of new rules, regulations and laws which are in danger of clogging the flow of useful information altogether at a time when an improvement in the flow of information for companies is seen as particularly desirable by those that own them.

The pressure on directors and communications people is to give more information at a time when the rules and regulations make it more and more difficult. The communication of financial information can be a high risk task, and should not be attempted without careful thought and sound professional advice.

It is quite daunting even to list all the key guides and Acts of Parliament:

• the Companies Act 1985;

• the Financial Services Act 1986;

• the Criminal Justice Act 1993;

• the Stock Exchange’s Listing Rules (Yellow Book);

• the Take-over Code (Blue Book);

• the Stock Exchange’s ‘Guidance on the dissemination of price sensitive information’ (Price Sensitivity Guide).

For most UK communications advisers the Sock Exchange publications are most relevant. They address directly the problems of issuing sensitive information. They may be self-imposed rules but the cost of transgressing them both in terms of money and damaged reputation can be considerable.

The Price Sensitivity Guide is an attempt to deal with the confusion of what companies should consider as price sensitive. It is of necessity still open to interpretation but the spirit is very clear, which is to stop a number of activities that were previously common practice, including selective briefing, particularly of analysts on price sensitive issues, briefing individual shareholders ahead of an announcement and using carefully placed leaks in newspapers to excite or tone down market expectations ahead of results or announcements.

The simple rule is that any sensitive information should be disseminated through the Stock Exchange to all shareholders at the same time. The problem remains that one person’s price sensitive statement is another’s confirmation of a well-known piece of public information.

Financial public relations is a specialist business and requires not only a thorough knowledge of all these rules and regulations, but also some experience in how they have been interpreted in the past. The coordination of the issue of information is also crucial if only to stay within the rules. Experienced financial advisers and public relations people are therefore vital.