The Securities and Exchange Board of India (SEBI) has made it mandatory for media firms to disclose stakes held by them in various companies under ‘private treaties’. SEBI had taken up with the Press Council of India its concerns on practice of many media groups entering into agreements, such as ‘private treaties’, with companies. Typically, such arrangements are with companies that are listed or which propose to come out with public offerings. These, in general, entail a company giving stake in it (shares, warrants, bonds, etc.) in return for media coverage through advertisements, news reports, advertorials, etc., in the print or electronic media.
In a press release issued, SEBI said that it was felt that such agreements might give rise to conflict of interest and might, therefore, result in dilution of the independence of press. This may consequently compromise the nature, quality and content of the news/ editorials relating to such companies. Needless to say, biased and motivated dissemination of information, guided by commercial considerations can potentially mislead investors in the securities market. Such journalism would not be in the interest of securities market.
SEBI, given its legal mandate to protect the interest of investors, felt that such brand building strategies of media groups, without appropriate and adequate disclosures may not be in the interest of investors and financial markets. There are prescribed norms of Journalistic Conduct that require journalists to disclose any interest that they may have in the company about which they are reporting. However, there are no equivalent requirements in the case of media companies holding a stake in the company which is being reported / covered.
The Press Council of India informed SEBI that in its meeting held on February 22, 2010 at New Delhi, it had accepted the following suggestions of the market regulator and had mandated the following:
1. Disclosures regarding stake held by the media company should be made in the news report/ article/ editorial in newspapers/ television relating to the company in which the media group holds such stake.
2. Disclosure on percentage of stake held by media groups in various companies under such ‘private treaties’ on the website of media groups should be made.
3. Any other disclosures relating to such agreements such as any nominee of the media group on the Board of Directors of the company, any management control or other details, which may be required to be disclosed and which may be a potential conflict of interest for media group, should also be mandatorily disclosed.