"Directors Share Trading “Windows” & “Blackouts” ASX Corporate...

"Directors Share Trading “Windows” & “Blackouts”

ASX Corporate Governance Council Recommendation 3.2 requires a listed company to publish its position concerning trading in company securities by directors, officers and employees.

Recent commentary has sought to draw conclusions that insider trading may be widespread among directors. Those conclusions are based upon patterns of trading within arbitrary time periods designated in advance of the announcement of matters such as yearly or half yearly results, trading updates or corporate activity. Such periods have been designated as ‘trading windows’ or ‘blackout periods’. This includes trades where the director concerned is not in possession of price sensitive information and the trade is approved in accordance with the board's policies.

The widespread implementation of continuous disclosure has meant that the regulation of trading focused solely on these arbitrary periods is misconceived. It is not accurate to categorise trading within a so-called ‘trading window’ as legitimate, or within a so-called ‘black-out period’ as prohibited.

The applicable rule on each occasion is not whether the dealing is an arbitrarily designated ‘trading window’ or ‘black-out period’, but whether the market is fully informed (my italics). This is a complex commercial judgment based upon the particular circumstances of the company at the time. In general practice, the judgment is made in consultation with the chairman, who will consult with senior management. It is a case by case assessment where general rules and arbitrarily designated time periods are of little assistance.

http://www.companydirectors.com.au/...paper-no10--director-share-trading.ashx?la=en