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Do investment leaks affect the market?

As we covered in one of our earlier articles today the FSA (Financial Services Authority) has today announced an investigation into the relationship between financial journalists and the corporate finance market. There is concern that information is being passed between the two areas of the financial arena, two areas which need to be sheltered from one another. But do investment leaks really affect the marketplace?

There is no doubt that speculation and rumours in the market place and in the financial press do have a major impact on share prices and stock indices. Any takeovers, profits warning or potentially important announcement can see share prices move if the information is leaked prior to the official announcement. However, as much as the regulators would like to plug these leaks forever there is no way that this can happen because ultimately too many people are now involved in each and every corporate transactions in the UK and around the world.

Despite the fact that there are potentially hefty fines for passing inside information and breaking market abuse regulations, each and every time before, the authorities have failed to stem this flow of information. Fines, the threat of expulsion from the city and even criminal prosecution have so far failed to finish off the problem and bring to an end the close relationship between journalism and the financial sector. In many ways this is now seen as part and parcel of the modern day stock market.

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