On 30 January 2015 the ASX released an amended version of ASX Listing Rule Guidance Note 27 - Trading Policies which provides updated guidance to listed entities regarding compliance with the requirements of ASX Listing Rules 12.9 to 12.12 regarding trading policies. Partner, Esteban Gomez and Associate, Rachel Austin discuss the updated Guidance Note.
Notably, the amended GN 27 is now significantly more detailed than the previous version of GN 27 and provides listed entities with additional practical guidance on ASX’s expectations regarding trading policies.
In particular, the amended GN 27:
- Reminds entities that the policy objective of implementing a trading policy should not only be to prevent the actual occurrence of insider trading, market manipulation or the obtainment of an improper advantage, but to avoid the perception of the same and the significant reputational damage that it may cause.
- Provides guidance as to who trading restrictions should be applied to. GN 27 provides that an entity’s trading policy must apply to its key management personnel, which are taken to include the entity’s directors and any senior executive (including the CEO) who has authority for planning, directing and controlling its activities (KMP). GN 27 also suggests that an entity should consider extending its trading policy to cover the close relatives of KMP, as well as considering the appropriateness of applying the policy to other types of employees.
- Provides practical guidance as to when trading should be restricted, including the requirement to have “closed periods” where KMP are generally prohibited from trading (which can be complied with by having “trading windows” or specifying “black-out periods”). It also provides guidance on:
- reserving the right to impose ad hoc trading restrictions;
- trading in exceptional circumstances with prior clearance, such in cases of ‘severe financial hardship’; and
- examples of trading that are commonly excluded from the restrictions in a trading policy
- Details examples of additional restrictions that entities should consider including in their trading policies, such as trading in derivatives, short-term trading, short selling, hedging transactions, margin lending, and trading in securities of other entities where insider information is held.
- Provides recommendations regarding the administration of the policy, such as procedures to clear trading as well as measures entities should implement to monitor and enforce compliance with its trading policy.
In light of the amendments to GN 27, listed entities to whom the rules apply are strongly urged to review their trading policies.