Journalism has the right to be wrong

The New York Times has an editorial in Sunday’s newspaper about the failure of the U.S. Supreme Court to hear a First Amendment case with business journalism implications.

The Times editorial states, “Unfortunately, the court missed an opportunity to uphold that principle when it refused to take an important First Amendment case last week.

“In the case, the publisher of a financial newsletter promised a hot stock tip, based on inside information, to people willing to pay $1,000. About 1,200 people agreed to pay, but the tip did not pan out, and the stock failed to soar. The Securities and Exchange Commission sued the publisher for securities fraud, and the lower courts agreed that the publisher, Frank Porter Stansberry and his company, Agora Inc., should be penalized.

“It was the first time the S.E.C. had gone after a publisher who did not have a stake in the stock in question. Normally, the laws against securities fraud are designed to prevent insider trading or manipulation by people who stand to profit through ownership of a stock.

“Mr. Stansberry’s actions might seem unorthodox or even unethical by the standards of most reputable publishers, but that does not make them illegal. The implications of the S.E.C.’s action are potentially profound: newspapers or Web sites promising their paying readers stock information that later turns out to be untrue suddenly leave themselves open to fraud charges. Any financial commentator who passes on bad information in good faith could be sued.”

Read more here.