Appeals Court Deals Blow to 'Hot News' Doctrine

Appeals Court Deals Blow to 'Hot News' Doctrine

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A federal appeals court cleared the way Monday for a financial-news website to publish stock market analysts’ private buy and sell recommendations in near-real time, striking a blow to a century-old legal doctrine that gave media companies control over the time-sensitive news they report.

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This is actually a small bit of good news, should it stand.

4-years ago, Barclays Capital, Merrill Lynch, Morgan Stanley, among other trading businesses claimed that news of this nature was their 'intellectual property' and that their public trading information could only be released by them.

The courts had decreed, since the case International News Service v. Associated Press, 248 U.S. 215 (1918), that 'hot' news has a limited time in which it is 'property' of those who secured the story. And it was based on that model, that the trading institutions wanted to control the release of their trading record. However, once a recommendation is released, it is no longer (for the purposes of this activity) 'proprietary,' as of the new ruling.

The 2nd U.S. Circuit Court of Appeals, though, found on appeal that Theflyonthewall was within its rights.

“We conclude that in this case, a firm’s ability to make news — by issuing a recommendation that is likely to affect the market price of a security — does not give rise to a right for it to control who breaks that news and how,” the appeals court ruled 3-0. The appellate court had stayed the lower court’s decision last year pending the outcome of oral arguments.

Prior to this, Theflyonthewall was legally obliged to wait until at least 10 a.m. before it publishes that information. The lower court also ordered it to wait two hours to publish the banks’ buy and sell reports.... Which seems to me only served the ability of market manipulators to influence trading based on their unique knowledge of when and what they told the investment community.

www.wired.com
(visit the link for the full news article)

This is very good news for the average investor. Should help level the playing field considerably between institutional investors and the average joes.

Actually the good news extends beyond the community of investors, if you consider that until now the playing field was never level. They might not call it insider trading, or unfair practices; but them knowing what the recommendations were allows them to leverage that knowledge and anticipate buying and selling surges to their advantage... if money is a finite toy, they were getting more than their share... and it was by judicial decree that it was so.

Perhaps in this one way, that advantage is no longer the big trading firms' "entitlement", at least so far....