New rules on black­out peri­ods and trad­ing win­dows for trad­ing in list­ed com­pa­ny shares

In brief — List­ed com­pa­nies now need a trad­ing policy

From 1 Jan­u­ary 2011 list­ed com­pa­nies are required under ASX List­ing Rule 12.9 to adopt a trad­ing pol­i­cy. Trad­ing poli­cies are designed to reduce the poten­tial for con­flicts of inter­est and insid­er trading.

Black­out periods 

Dur­ing a black­out peri­od, direc­tors and senior staff are pre­vent­ed from trad­ing in their com­pa­ny’s stock. They are per­mit­ted to trade this stock at any time out­side the des­ig­nat­ed black­out peri­od. The time out­side the black­out peri­od is known as a trad­ing win­dow.

Accord­ing to the ASX, the typ­i­cal black­out peri­od is the peri­od between the close of the com­pa­ny’s finan­cial books and the release to the mar­ket of the com­pa­ny’s half year­ly or annu­al accounts. How­ev­er, many organ­i­sa­tions also have black­out peri­ods for oth­er occasions. 

What you need to consider 

There are var­i­ous ques­tions you need to ask your­self when for­mu­lat­ing a trad­ing pol­i­cy for your cor­po­ra­tion. These include:

  • Who with­in the com­pa­ny will the pol­i­cy apply to?
  • When will there be black­out periods?
  • Which class­es of secu­ri­ty will the black­out peri­ods apply to?
  • Will any excep­tions be grant­ed? If so, to whom?
  • Is the trad­ing pol­i­cy in breach of the Cor­po­ra­tions Act or ASX List­ing Rules?
Com­mu­ni­cate the policy 

The imple­men­ta­tion of a trad­ing pol­i­cy was until very recent­ly a vol­un­tary process. How­ev­er, as it is now com­pul­so­ry, it is impor­tant that all list­ed com­pa­nies cre­ate and imple­ment such a pol­i­cy and ensure that it is effec­tive­ly com­mu­ni­cat­ed to all direc­tors and senior staff. 

As insid­er trad­ing attracts severe penal­ties, includ­ing impris­on­ment, it is imper­a­tive that this new require­ment is not treat­ed as a mere formality.

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