Proposed amendments to ASX listing rules: trading during “blackout periods”

Following the Corporations and Markets Advisory Committee’s July 2009 Aspects of Market Integrity report, which questioned whether share trading during "blackout periods" should adopt a "best practice" approach, the ASX has released a public consultation paper outlining proposed amendments to the listing rules. The proposed amendments would introduce minimum requirements for company trading policies. These "blackout periods" typically happen during the preparation of half-year and full-year financial results, and when the company is otherwise considering market-sensitive matters.

At the moment, the ASX Corporate Governance Council's Principles and Recommendations states that companies should establish a policy concerning trading by directors, senior executives and employees; should disclose that policy; and should introduce compliance standards and procedures to ensure proper implementation of the policy. Most listed entities have already adopted a trading policy under their corporate governance arrangements, but a number of listed entities have either not adopted a policy, or have failed to comply with the policy when considering waivers of the prohibition.

The new amendments to the listing rules involve two elements:

1. a new listing rule requiring a listed entity to have a trading policy for key management personnel during prohibited periods, which must contain specific information as to:
• the prohibited period;
• the restrictions on trade;
• the exceptional circumstances where trading will be allowed within a prohibited period; and
• the procedures for seeking clearance to trade during a prohibited period.
  
  The policy will need to be submitted to ASX for release to the market.
  
  
2. an amendment to listing rule 3.19A to require a director, when lodging an Appendix 3Y Change of Director's Interest notice, to provide information about whether the change occurred during a prohibited period. Key management personnel other than directors will not have a disclosure obligation.

The amendments are based on a disclosure and principles-based approach, which encourages listed entities to adopt and implement a robust trading policy that is appropriate to their particular needs. Companies will be able to determine their own prohibited periods or exceptional circumstances with the assistance of published guidelines from ASX. As an example, it is anticipated that exceptional circumstances will be limited to passive trades and financial hardship.

The ASX is inviting comments on the proposed amendments. Submissions are to be provided before 26 February 2010, with a view to implementation in late 2010 or early 2011.

Before and following implementation of the amendments:

• listed entities that already have a trading policy will need to review and update their policy to incorporate these amendments, and take the necessary steps to lodge the policy with the ASX for release to the market;
• listed entities that have not yet adopted a trading policy will need to adopt a policy for lodgement with ASX and release it to the market;
• listed entities will need to ensure compliance with their trading policy in order to avoid sanctions by the ASX; and
• company secretaries will need to ensure they have access to the revised Appendix 3Y forms, and that these are properly completed with the new information.

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