On 30 January 2015, ASX Limited released a revised Guidance Note (GN27) on Trading Policies in response to some published criticism of anomalies with the content of existing policies under ASX Listing Rule 12.
Having an ASX compliant share trading policy is one of the essential planks in an anti-insider trading policy. It also makes the rights of company directors to trade in shares very transparent. Trading policies specify when it is permissible to trade in shares (trading windows) and when trading is not allowed (blackout periods).
By the release of GN27, the ASX requires all ASX listed companies to review their existing trading policies and to ‘tighten them up’.
New content prescribed in GN27 explains how existing policies should be expanded (and what needs to be covered in new trading policies).
Expanding your company’s existing share trading policy
These are the expansion areas required by the ASX:
- What periods are defined as ‘blackouts’ or closed for trading.
- What periods are generally acceptable trading windows.
- Explaining the policy on trading in derivatives issued over the entity’s securities.
- Explaining if margin lending or other security financing arrangements are allowed.
- Explaining the policy on trading in securities in other entities.
- Explaining what matters are to be taken into account when a ‘clearance to trade’ is granted.
- Covering monitoring and enforcing the policy.
The ASX has not specified a transition time for companies to comply with GN27. ASX listed companies are contractually bound by their listing application to comply with the ASX Listing Rules, in particular, ASX Listing Rule 12.9 (share trading policy). Because ASX Listing Rules 12.9 to 12.12 have not been amended to cover the detail required by GN27, GN27 would seem to have status as ‘good practice guidance’ rather than being prescriptive content backed by the ASX Listing Rules. It is debateable therefore as to whether GN27 can be regarded as mandatory to follow even though an ASX Guidance Note represents the ASX’s interpretation of a particular listing rule and represents compliance guidance from the ASX.
However, given that GN27 may only be influential over a decision for a company to amend its share trading policy, good corporate governance suggests that by adopting the GN27 changes, a listed entity is demonstrating to its shareholders and other stakeholders that it treats share trading seriously.