11.   (12 marks) In the article entitled “Financial Journalism, Conflicts of Interest and Ethics: A Case...

11.   In the article entitled “Financial Journalism, Conflicts of Interest and Ethics: A Case Study of Hong Kong”', the author uses the “social contract approach” to examine issues related to ethical responsibility in financial journalism.
a.   Briefly describe the meaning of the three ethically questionable practices raised by the author, namely market manipulation, insider trading, and nondisclosure of interests, as they apply to journalism.                   
b.   Do you think it is unethical for a journalist to report on a stock or security that he or she owns without disclosing it? Justify your answer with reference to the three ``ethically questionable practices'' mentioned above.            

Homework Answers

Answer #1

(A) Market Manipulation:

  The attempt or act to artificially change the price of a security or a market movement with the intent to make a profit. One example is wash selling, in which an investor both sells then quickly re-buys the same security, hoping to create the impression of increased trading volume, and therefore raise the price. Another is churning, in which an investor makes both buy and sell orders through different brokers to create the impression of increased interest in the security and raise the price. Manipulation can be used to both increase and decrease prices, depending on the investor's perceived needs. Manipulation is illegal under the Securities Exchange Act of 1934.

Insider Trading:

Insider trading involves trading in a public company's stock by someone who has non-public, material information about that stock for any reason. Insider trading can be either illegal or legal depending on when the insider makes the trade. It is illegal when the material information is still non-public, and this sort of insider trading comes with harsh consequences.

Non disclosure of interest:

A non-disclosure agreement is a legally binding contract that establishes a confidential relationship. The party or parties signing the agreement agree that sensitive information they may obtain will not be made available to any others. ... In this case, it may be called a mutual non-disclosure agreement.

(B)  Yes , I think its a unethical practice for journalist to report on any stock without disclosing its holding. Because it may have positive or negative impact on stock price depending on their report . Journalist might use it in there favour and report accordingly . Secondly , they might have some confidential or undisclosed information about the company and they may use it to trade in that stock and afterwards they may report the information to gain the extraodrinary returns . It may also regarded as market manipulation and non dislcosure of interest. So , its unethical.

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