Perception counts

4 Feb image

The Australian Securities Exchange (ASX) has substantially updated its guidance note on securities trading policies, which it released on 30 January 2015, following a highly-publicised incident involving directors of David Jones.

The updated guidance follows a roundtable held by the Australian Securities and Investments Commission in March 2014 that the Australian Institute of Company Directors participated in to discuss, among other matters, the regulation of director share trading in Australia. The roundtable was held after two directors of David Jones acquired shares in the company at a time when it appeared to the market that they may have held inside information. Both directors subsequently stepped down from the board, with the chairman announcing they had no choice but to quit.

While the roundtable concluded that no changes to the regulatory framework were warranted, ASX has significantly expanded its guidance note to assist listed companies to comply with their obligations under the listing rules. (It should be noted that only the guidance has been changed, and there have been no changes made to the listing rule requirements.)

The key changes to the guidance note include:

  • Increased emphasis on the fact that the purpose of a company’s trading policy should not just be to minimise the risk of insider trading, but also to avoid the perception of insider trading and the significant reputational damage this can cause.
  • Providing greater guidance on the procedures that a company should have in place for the granting of clearances to trade and setting appropriate, tailored closed periods and trading windows.
  • Giving more guidance on other matters that a company may want to cover in its trading policy, including trading in derivatives, short-term trading, short selling, hedging and margin lending.

The updated guidance note can be found on the ASX website.