By Tim Cox, Partner
On 30 January 2015, ASX released the updated Guidance Note 27 Trading Policies. The purpose of Guidance Note 27 is to assist listed entities to comply with their obligation to have a share trading policy. The revised Guidance Note is far more comprehensive in comparison to its predecessor.
In light of the revised Guidance Note, now is a perfect time for listed entities to review their trading policies.
Snapshot of the Guidance Note
The revised Guidance Note addresses:
- the rationale as to why listed entities are required to have a trading policy;
- who should be restricted from trading;
- when should trading be restricted;
- what types of trading should be restricted;
- when trading may be permitted;
- the procedures should be implemented to grant clearances to trade;
- other matters that could be addressed in a trading policy;
- disclosure and compliance matters.
The Guidance Note recommends that a listed entity consider addressing a number of matters in its trading policy which are not strictly required by the ASX Listing Rules, for example:There is a strong emphasis in the revised Guidance Note on the importance of not only minimising the risk of actual insider trading, but also avoiding the appearance of insider trading and the reputational damage caused by an allegation or perception of insider trading.
- whether it is also appropriate to extend the trading policy to cover trading by:
- close family members of key management personnel (“KMP”); or
- a wider group of employees who work closely with KMP;
- to carefully consider whether its trading policy should prohibit:
- short-term trading in its securities or short selling of its securities by KMP and any others covered by its trading policy;
- KMP and any others covered by its trading policy from entering into any transaction to hedge their exposure to its securities;
- KMP and others covered by its trading policy from entering into margin lending or other secured financing arrangements in respect of its securities;
- to include in its policy:
- a warning that a person who possesses inside information about its securities is prohibited from trading in those securities under insider trading laws, and that this applies even where the trade occurs during a permitted trading window or outside a black-out period; and
- an explanation of the laws prohibiting insider trading and the consequences of breaching these laws.
The Guidance Note also reminds listed entities that they should have appropriate measures in place to monitor and enforce compliance with their trading policies. For example, ASX considers at a minimum, an entity should keep records to capture details of all applications by KMP for clearance to trade under its trading policy and its decision on such applications.
When was the last time you reviewed your share trading policy?
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