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Journalism of Courage
Setting the stage for a much-needed debate on the practice of TV channels, anchors and media professionals “recommending hot stocks” to investors, outgoing chairman of the Securities Exchange Board of India (SEBI) Meleveethil Damodaran has raised serious questions about the media’s role in “talking up” or “talking down” a stock. And has called for far more open and strict disclosure norms than the “routine” ones being currently followed.
Speaking to The Indian Express Editor-in-Chief Shekhar Gupta on NDTV’s Walk the Talk (to be broadcast on Saturday at 9.30 pm), Damodaran said: “When we heard the term anchor investors first, I thought anchor investor is the guy that brings in a lot of money initially into a project around whose reputation others invest. I am beginning to believe at the end of my three-year tenure that an anchor investor is one who is an anchor and an investor put together. I am worried that (they are) those who are responsible…who take the message to a billion plus people who will hopefully, one day be interested in the market. If that message gets distorted, what happens?”
Similar concerns were underlined by Prime Minister Manmohan Singh while inaugurating the new SEBI headquarters in 2006 where he underlined the importance of “ethical conduct and effective disclosure norms.” Financial markets are more susceptible than other markets, he said, to “asymmetric” information. “Such asymmetry encourages non-transparency and created opportunities for excessive profiteering. It not only discourages more widespread participation in the markets but also enables market manipulation,” the PM had said.
Asked if he had come across evidence of TV anchors and senior journalists playing the market, Damodaran said, “Certainly. It was not a question of playing the market but it’s a question of am I talking up something, am I talking down something.”
Referring to a letter he received on his penultimate day in office from an aggrieved investor, Damodaran said, “In a letter sent to a TV person along with a few media houses and a copy endorsed to me, the investor asked, ‘I saw you guys saying everything was good about a particular issue till it listed below the issue price. And now I find you saying everything is wrong and talking it down. What happened to you guys?”
“I think there’s considerable merit in it (the letter)…How is it that suddenly on listing, all the virtues that you thought resided in some particular issue disappeared?” Damodaran stressed. “I think the media has a very large role to play and I am afraid that that role is not being played to the best of its ability.”
Citing the example of electronic media, he said, “There are people who make statements that are very clear indications of talking up or talking down stocks. And what do we have by way of investor protection? A disclosure that says, is this person having a position in that stock? Earlier, we had statements like ‘not really’, ‘maybe’, ‘it’s likely that my clients have.’ Today, you get a broad spectrum such as ‘It is entirely possible that I have this.’ Is this disclosure? It is clearly not. I would want to know before someone gives me advice whether you are giving me that advice because you will benefit.” Calling current disclosures “far too routine,” Damodaran said, “In fact, people have been saying things like ‘We are running out of time, can you make the disclosure to us?’ Disclosure is complete if you make it to the right audience, not to a television anchor. It is to the investor who is going to put his money. Filing disclosures is not good enough.”
Damodaran said the issue is not really a new one but media houses have taken it lightly when brought up by the regulator on earlier occasions. “My predecessor and his predecessor had meetings with those in the media. The first time, they were told, ‘We will write a code of conduct.’ Maybe they have an in-house code of conduct, but we didn’t see anything in the industry. The second time, my immediate predecessor offered to write it out himself, I am told. I don’t think there were too many takers. We hoped that we would be third time lucky by individually engaging people. There have been some improvements, but more is needed.”
“Ideally, I would like a situation where at the beginning of the program — it might not be media-friendly in terms of excitement — (it is disclosed) we are going to discuss these five stocks and these two persons who are in your studio have these exposures. So that while he is talking, I can look at his face and take a judgement call whether this guy is pushing up stocks.”
