The FSA has made changes to the Model Code to enable persons discharging managerial responsibilities (PDMRs) to enter into trading plans (a written plan between a PDMR and an independent third party which sets out a strategy for dealing in securities of a listed company).
The changes came into effect on 6 March 2009 and largely implement those proposed in the FSA's quarterly consultation paper published in October 2008 (see article in our October 2008 e-bulletin: FSA consults on proposed amendments to the Model Code).
The Model Code, contained in Annex 1 to chapter 9 of the Listing Rules, imposes restrictions on dealings by PDMRs in securities of listed companies. Under the Model Code, PDMRs must generally receive clearance from the company chairman (or a director designated by the board for this purpose) before dealing in the company's securities. Other than in exceptional circumstances, clearance will not be given during any prohibited period (broadly, a set period in the run up to any of the company's results announcements and any other period where there exists inside information in relation to the company).
As a result of the FSA's changes, a PDMR will now be able to deal in the securities of a listed company pursuant to a trading plan during a prohibited period provided that:
- the trading plan was entered into before the prohibited period;
- clearance was obtained by the PDMR before entering into the trading plan and/or before any amendment was made to the trading plan; and
- the trading plan does not permit the PDMR to exercise any influence or discretion over how, when or whether to effect dealings.
The trading plan must either specify (or include a written formula or algorithm for determining) the dates, prices and quantities of securities that can be dealt or give discretion regarding trading decisions to the independent third party.
A trading plan cannot be entered into or amended by the PDMR during a prohibited period (although clearance may be given to the cancellation of a trading plan in exceptional circumstances).
View the FSA instrument amending the Model Code (4 page pdf).
Alternatively, the text of the new Model Code can be viewed in the FSA Handbook on the FSA website (web page).