ASX has released details of new Listing Rules including 12.9, 12.10 and 12.12 which require listed entities to adopt and disclose a trading policy.
The new Listing Rules will apply to listed entities from 1 January 2011. The trading policy must govern trading in the entity’s securities by key management personnel but may extend to a wider group.
‘Key management personnel’ includes all persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, and includes all directors.
At a minimum, the trading policy must specify:
- fixed closed periods during which key management personnel may not trade in the entity’s securities (nor derivative products);
- exclusions to the restrictions;
- exceptional circumstances in which key management personnel may be permitted to trade during a closed period with prior written clearance; and
- the procedures for obtaining prior written clearance.
Listed entities may adopt broader restrictions (e.g. the use of trading windows).
The trading policy should also set out rules with respect to key management personnel entering into agreements that provide lenders with rights over an entity’s securities (e.g. margin lending agreements).
Insider trading is prohibited both within and outside closed periods.
The trading policy may allow trading within closed periods where:
trading results in there being no change in beneficial interest in the securities;
where the restricted person has no influence over trading decisions (e.g. investments in a scheme managed by a third party, or securities in a superannuation fund);
trading occurs under an offer to all or most security holders of the entity (e.g. a rights issue, a share purchase plan, a dividend or distribution reinvestment plan, an equal access buyback, or acceptance of a takeover offer); or
the key management personnel could not reasonably have exercised their rights outside a closed period (e.g. exercising options under an employee incentive scheme, conversion of a convertible security where the final date for exercise/conversion falls within a closed period and the key management personnel had no opportunity to exercise their right earlier, or under a non-discretionary trading plan for which prior written clearance was provided in accordance with the trading policy).
The trading policy should set out:
what are considered to be exceptional circumstances (e.g. where a person is in severe financial hardship, or where a person is required to transfer securities under a court enforceable undertaking or other overriding legal or regulatory requirement);
the procedure for key management personnel to obtain prior written clearance from a designated officer for trading within a closed period in exceptional circumstances;
the procedure for the Chairman to provide prior written clearance in exceptional circumstances not specified in the trading policy; and
the form of the prior written clearance and the duration for which it is effective.
Whilst it is for each entity to determine (and set out in their trading policy) what constitutes exceptional circumstances, ASX has indicated that a tax liability:
- relating to securities received under an employee incentive scheme; or
- which the person might have other means of satisfying,
would not normally constitute severe financial hardship.
Whilst the ASX has not confirmed when it will begin enforcing the new Listing Rules, the expectation is that listed entities will provide the company announcements office with their trading policy for release to the market:
by 1 January 2011 and/or upon listing; and
subsequently, where there is a material change to the trading policy (e.g. changes to the closed periods, changes to exclusions or changes to exceptional circumstances) within 5 business days of the material changes taking effect.
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