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.
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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