Press Council accepts Sebi mandate for stake disclosure by media firms under private treaties

MUMBAI: In a bid to safeguard journalistic standards, the Press Council of India has accepted some suggestions made by the Securities and Exchange Board of India (Sebi) that make it mandatory for media companies to disclose any interest or stake in the corporate sector under the garb of ‘Private Treaties’.

The Press Council said that the media companies should make disclosures regarding stakes held by them in the news report/ article/ editorial in newspapers/television relating to the company in which the media group holds such stake.  
  The Press Council also said that disclosures on percentage of stakes held by media groups in various companies under such ‘Private Treaties‘ be made on their websites.

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, it said.

India’s stock market regulator, Sebi, had taken a note of the practice of some media groups to enter into agreements with companies. Sebi observed that typically such arrangements are with companies which are listed or which proposes 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,” Sebi said.

Taking the situation seriously, Sebi felt that such agreements may give rise to conflict of interest and may, 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 said.

In a statement on its site, Sebi said, “Given its legal mandate to protect the interest of investors, Sebi 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, the Sebi note mentioned that there are no equivalent requirements in the case of media companies holding a stake in the company which is being reported or covered.

“This news does not impact valuations but does increase the credibility of business news reporting manifold. It is a very important and necessary step taken by Sebi and accepted by the Press Council of India. This will ensure that large media groups who have scores of investments do not use their media platform for personal gains and the integrity of news reporting is maintained,” a research analyst said.

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