(AP) In a move sparked by the resignation of its co-founder amid inquiries into his stock trading, MarketWatch.com Inc. is requiring all employees to register their stock trades with the company.
The company also will conduct random audits of its financial journalists and senior executives to verify trading information.
After MarketWatch co-founder and newsletter writer Thom Calandra resigned last Thursday in the face of probes by the Securities and Exchange Commission and the company, company officials said they would soon unveil stricter rules on journalists’ disclosure of stock ownership to readers and to the company. While much of the new policy, such as a minimum three-month holding period for stocks, had been in the works for nearly a year, the plan to make spot checks of journalists’ trading came in response to Calandra’s refusal to turn over his trading records, Doug Appleton, MarketWatch’s general counsel, told the Wall Street Journal Online.
The purpose of the random audits is to ensure journalists aren’t trading on news they receive ahead of the market nor violating the company’s internal trading laws, and thereby to bolster the San Francisco company’s credibility, Appleton said. He added that the company’s roughly 40 journalists and about 10 senior managers will be subject to the random audits, which he likened to drug tests.
In the random audits, employees will have to turn over official trading records from their brokers. If they refuse or if the records reveal their self-reported trading was incomplete, they will face penalties and possible firing. Further details are still being hashed out.
While most financial publishers restrict employees’ stock trading in one way or another, random audits are highly unusual.
Random audits won’t start for at least a month because the company first must develop a Web-based registry where employees will report their intentions to trade stocks and will be advised not to make the trade, and instead to talk to Appleton, if they give the wrong answer to any of several questions such as, “Are you currently writing an article about the company?”
Among other new rules: Employees must wait five business days after writing about a stock to trade in it, and only if the three-month minimum holding period had passed; employees must cooperate with internal investigations; and journalists can’t accept travel. In his now-discontinued newsletter, Calandra had disclosed that Robert Friedland, chairman of Ivanhoe Mines, provided his travel to Mongolia. Calandra recommended shares in the Canadian company to his readers.
Also Wednesday, MarketWatch.com reported its net earnings increased nearly threefold in the fourth quarter, reflecting the improving business conditions that its customers are experiencing.
The company said net income was $2.5 million, or 13 cents a share, in the quarter ended Dec. 31, compared with $854,000, or 5 cents a share, in the year-earlier period.
Revenue was $13.4 million, up 14% from $11.7 million a year ago.
The company saw advertising revenues climb 40% from the same period last year, driven primarily by continuing activity from customers in the technology, financial services and travel sectors.