Rocky Mountain News business editor Rob Reuteman, who is a SABEW board member, has a nice round-up of the ethical discussion surrounding using short sellers as sources from last weekend’s Society of American Business Editors and Writers’ annual conference in his Saturday column.
Reuteman’s analysis is that SEC Chairman Christopher Cox tried to suck up to business journalists during his speech and later presentation. But he also noted that there are ethical considerations when using short sellers.
This whole issue of business journalists using short sellers as anonymous sources for negative information about companies has come to the forefront of the discussion in the wake of the SEC issuing subpoenas to business journalists, including MarketWatch’s Herb Greenberg, as part of an investigation into some hedge funds, to determine whether such investors were manipulating the market. Some people have criticized the reporters for using such sources, although they don’t seem to criticize reporters when they use sources who are bullish about the stocks they’re writing about.
Wrote Reuteman, “At issue, of course, is the ‘dilemma of the evil but truthful source,’ said Ed Wasserman, a professor of journalism ethics at Washington and Lee University, who spoke about the Overstock case at a separate panel on ethics. ‘They tip you, hoping they will make money off something you publish, and their gain will be someone else’s loss.’
“Panel moderator Mike Kandel, founding financial editor at CNN, said, ‘Everyone has an angle. There are very few disinterested observers who know what’s going on. Let readers decide.’
“Panelist Steve Andreder, a former financial columnist at Barron’s, said, ‘Fraud is only detectable in two ways. Either someone tells you about it or you get lucky.'”
Read more here.