Submission from the Australian Press Council to the Parliamentary Joint Statutory Committee on Corporations and Securities on the Financial Services Reform Bill 2001.

6 June 2001

Executive Summary

The Council submits that the Committee should recommend that:

Equivalent provision to sections 77(6) and 77(7) of the Corporations Act be inserted into the Financial Services Reform Bill, and/or that proposed ASIC rules governing such a media exemption should be in line with ASIC's existing PS 118 by re-promulgating PS 118 as the new rules under the authority provided by the Bill.

Provision of information of public interest

The Press Council's Statement of Principles notes that "the freedom of the press to publish is the freedom of the people to be informed". This is particularly important in matters of public interest and importance, such as the reporting of, and commentary on, the matters related to business.

For this reason, the Council expresses its concern with one apparent amendment to the current licensing and conduct regime contained in Chapter 7 of the Corporations Law which directly affects the ability of the press fairly to report on corporate matters. Under the current regime, journalists are not required to hold a license in relation to securities reports published by it as an incidental part of the publication of newspapers and other media services, the principle purpose of which is other than to advise others about securities or to publish securities reports.

The Financial Services Reform Bill 2001 does not contain an equivalent exemption to the licensing provisions. Instead it provides for a complicated regulatory process to be administered by the ASIC which may or may not result in a media exemption for the Bill's licensing provisions.

The Press Council is of the view that the current system is working well. In the absence of an inhibiting regulatory regime, the press disseminates information of public interest with respect to financial products and their issuers. It also informs the public of the conduct required in this area and of the actual behaviour of market participants. The absence of an inhibiting regulatory regime ensures that market information is widely disseminated. This maintains the transparency of Australian markets.

In order to perform its fundamental social role of informing the public on matters of public interest, the press must be able to report relevant material in a direct, clear and timely fashion. It is inappropriate for the press to be burdened with a regulatory regime which would lead it to have to consider whether the information that they propose to disseminate is financial product advice or to re-express that material so that it eliminates the implication that it is financial product advice.

No evidence of dissatisfaction

There is no evidence of any dissatisfaction with the current regime and, indeed, ASIC has indicated that there is no net regulatory benefit in changing the regulation concerning financial journalists and publishers. Despite the extensive investigation of the regulation of the financial services industry (including the Financial System [Wallis] inquiry of 1997), there has been no suggestion that the current exclusion in relation to the media is inappropriate. If a publication has the sole or dominant purpose of providing financial product advice, the licensing regime (and the obligations on licensees) should apply. However, financial advice provided by "general" media does not appear to have been considered by anyone to require licensing. Further, in ASIC Policy Statement 118, updated in January 2000, ASIC states:

"ASIC does not see any net regulatory benefit in seeking Law reform to remove the media exemption in s77(6)."

We are not aware of any regulatory justification that has been given for the elimination of the "media exemption".

The current law and practice work well

Both publishers and financial journalists are, and will continue to be, subject to the potential liability for loss occasioned by misleading or deceptive conduct in relation to financial products. Thus there is already a sufficient incentive to ensure that statements made in the press are accurate and based on reasonable grounds.

The current regime is sufficient. ASIC Policy Statement 118 provides detailed guidance as to when a journalist requires a license and addresses the various concerns which might be raised in relation to a journalist providing financial advice. The press generally insists that there is proper disclosure of relevant interests by journalists in stories that they write and that there are no direct or indirect commercial benefits from information in the stories that they write.

The Council's Statement of Principles deals with same question by noting that "A publication is justified in strongly advocating its own views on controversial topics provided that it treats its readers fairly by", inter alia, "disclosing any commercial or other interest which might be construed as influencing the publication's presentation of news or opinion".

Conclusion

For those reasons, the Council submits that the Committee should recommend that: "Equivalent provision to sections 77(6) and 77(7) of the Corporations Act be inserted into the Financial Services Reform Bill, and/or that proposed ASIC rules governing such a media exemption should be in line with ASIC's existing PS 118 by re-promulgating PS 118 as the new rules under the authority provided by the Bill."

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