ASIC issues a reminder on director trading

ASIC has provided further guidance on director trading in light of the 'significant volatility in financial markets' at this time.

Issued on 7 May, the updated guidance reminds directors to:

  • consider their entity’s trading policy
  • consider the information in their possession – and account for the current uncertain and volatile market conditions
  • notify the market
  • consider conflicts and disclosure obligations arising from margin loans and similar arrangements.

ASIC considers these matters to be particularly relevant in the current market environment created by COVID-19. Some of the considerations are also relevant to other ‘insiders’, such as other company officers and key management personnel, as well as to responsible entities.

ASIC states that if a request for prior written approval is made to trade during a “blackout period” or in other circumstances then it is important that a person in a position of appropriate authority carefully and fully assess the circumstances of the proposed trade. Under the ASX listing rules it is expected that such requests will be made only in ‘exceptional circumstances’ specified in the trading policy. ASX has indicated that it expects approval to be granted sparingly and with caution. For more information see ASX’s Guidance Note 27 Trading policies (GN 27).

Even if a proposed trade is not restricted by the listed entity’s trading policy – or prior approval for the trade is sought and granted in accordance with the policy – a director or other insider should still consider whether they are in possession of any information which:

  • may give rise to perceptions that could adversely impact their, or their listed entity’s standing or reputation; or
  • otherwise may mean the trade is prohibited – for example because the information is not generally available and could reasonably be expected to have a material effect on the price or value of the securities if it were made available.

When considering the materiality of information to which they have access, directors and other insiders should factor in (among other things):

  • the current uncertain and volatile trading environment
  • the impact of the fast-changing events and market conditions on the currency and reliability of previous disclosures made to the market
  • any reliance on disclosure exemptions or carve-outs by the entity (particularly where this represents a change in historical disclosure practices by the entity).

For more information on issues to consider when developing or reviewing a trading policy, members can access our Good Governance Guide. 

View the guide

 

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