UPDATE TO ASX GUIDANCE NOTE 27 ON SHARE TRADING POLICIES

What is it?

On 30 January 2015, ASX released its revised Guidance Note 27 (GN 27), to assist companies to comply with their share trading policy obligations.

What does it mean?

Revised GN 27 provides more detailed guidance in relation to trading policy obligations under Listing Rules 12.9 – 12.12, with a particular focus on listed entities having a ‘fit for purpose’ trading policy.  It makes the point that a share trading policy is not only to minimise the risk of actual insider trading, but also to avoid the appearance of insider trading and the reputational damage that may cause. There are no changes to the actual listing rules themselves.

GrilloHiggins can review your existing trading policies and provide assistance with updates to ensure compliance with revised GN 27.

Why the change?

GN 27 was revised in light of the market developments since the last update in January 2012.  This includes the market concerns that arose in 2013 when the chair of David Jones approved share trading by two directors, just prior to the release of quarterly sales figures by David Jones.  While ASIC concluded that insider trading had not occurred, they emphasised the need to address the risk of a perception of insider trading when creating share trading policies.

What does it cover?

Specifically, revised GN 27 covers:

  • Policy objectives behind trading policies;
  • Who should be restricted from trading in a listed entity’s securities;
  • When should trading in a listed entity’s securities be restricted;
  • What type of trading should be restricted;
  • Exceptions where trading may be permitted;
  • Procedures a listed entity should have to grant clearances to trade; and
  • Enforcement of trading policies.

What do I need to do?

All listed entities should review their trading policies in light of revised GN 27.  Important issues to consider include:

  • Whether the approval processes prescribed in the trading policy are sufficient to avoid not merely actual, but also any potential perception of insider trading;
  • Whether ‘closed periods’ or trading windows are appropriately tailored to the entity’s circumstances;
  • Whether the policy should extend beyond the key management personnel to close family members and a wider group of employees;
  • The circumstances and manner in which ad hoc restrictions on trading may be imposed;
  • The types of trading that should be restricted or prohibited, such as short-term trading, hedging and margin loans; and
  • Implementing appropriate measures for monitoring and enforcing compliance with the trading policy.

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