Dealing Rules for Employees and Directors
Introduction
Company employees and directors may have in their possession sensitive commercial information which could materially affect the value of company shares and securities.
The Corporations Act 2001(Cth) prohibits insider trading in relation to financial products. The provisions are wide ranging and breaches are serious offences.
This document:
(a) provides an outline of the insider trading and other relevant provisions of the Corporations Act;
(b) sets out the rules relating to dealings by employees and directors in shares and other securities issued by the company (“company securities”);
These Rules are designed to assist in preventing breaches of the insider trading provisions of the Corporations Act. Ultimately it is the responsibility of an employee or director to ensure that none of his or her dealings could constitute insider trading.
Insider Trading Prohibition
The nature of the Prohibition
Section 1043A (of Part 7.10, Division 3) of the Corporations Act makes it an offence for a person in possession of information that is not generally available but which, if generally available, might materially impact the price or value of company securities, to:
- trade in (i.e. apply for, acquire or dispose of, or enter into an agreement to do any of these things); or
- procure another person to trade in, company securities (collectively referred to as deal in company securities).
It is also an offence to tip the information to another person with the knowledge that the person could deal in company securities. Accordingly the effect of this section cannot be avoided by simply getting another person to deal on your behalf.
How You Become Aware of the Information is Irrelevant
It is irrelevant how or in what capacity the person came into possession of the information.
This means that s 1043A will apply to any employee or director who acquires inside information in relation to company securities, no matter in which capacity and is prohibited from dealing in company securities.
Information Which Might Affect Price Value
The prohibition refers to unpublished information which, if generally available, might materially impact the price or value of company securities.
What Does Information Include?
Information includes matters of supposition or speculation and matters relating to the intentions or likely intentions of a person.
What Information Might Materially Affect Price or Value?
This means information that a reasonable person would expect to have a material effect on the price or value of company securities. A reasonable person would be taken to expect information to have a material effect on price or value if the information would be likely to influence persons who commonly invest in securities whether or not to do so.
Examples of this type of information which might affect the price or value of company securities include:
- proposed changes in the capital structure, capital returns and buy backs of financial products;
- information relating to financial results;
- a material acquisition, divestment or realisation of assets;
- proposed dividends and share issues;
- changes to the Board;
- possible events which could have a material impact on profits (negatively or positively) e.g, loss of a major customer;
- proposed changes in the nature of the business of the company;
- notification of a substantial shareholding; and
- any information required to be announced to the market pursuant to Listing Rule 3.1.
What does Unpublished Mean?
Unpublished for this purpose means that the information is not generally available. Information is generally available if it consists of readily observable matter, or it has been disseminated in a manner likely to bring it to the attention of investors and a reasonable period has elapsed.
Other Relevent Corporations Act Provisions
Officers and employees are subject to the duties set out in sections 182, 183 and 184 of the Corporations Act. Officers are subject to additional duties outlined in sections 180 and 181 of the Corporations Act.
No Improper Use of Inside Information (s183 and s184)
An officer or employee, or former officer or employee must not make improper use of information acquired by virtue of his or her position as such an officer or employee to gain, directly or indirectly, an advantage for himself or herself or for any other person, or to cause detriment to the company.
No Gain by Improper Use of Position (s182 and s184)
An officer or employee must not make improper use of his or her position as such an officer or employee, to gain, directly or indirectly, an advantage for himself or herself or for any other person, or to cause detriment to the company.
Care and Diligence (s180)
An officer must exercise their powers and discharge their duties with the degree of care and diligence a reasonable person would exercise in the same circumstances.
Good Faith (s181 and s184)
An officer must exercise their powers and discharge their duties in good faith in the best interests of the company. An officer commits an offence if they are reckless or are intentionally dishonest and fail to exercise their powers and discharge their duties in good faith in the best interests of the company and for a proper purpose.
Dealing in Securities Issued by the Company
No Dealing Permitted During a Non Trading Period
Employees and directors are permitted to deal in company shares throughout the year except during the following periods:
- 1st January until midday Australian Eastern Standard Time (AEST) on the next business day after the day on which the half-year results are released; and
- 1st July until midday AEST on the next business day after the day on which the full-year results are released.
Each period is referred to as the Non Trading Period. The period where dealing is permitted is called the Trading Period.
Prohibition in Dealing While in Possession of Relevant Information
Dealing in shares is subject to the prohibition that an employee or director must not deal in shares:
- at any time when he or she is in possession of unpublished, information which, if generally available, might materially affect the price or value of those shares; and
- on the day the public announcement is made in relation to that matter.
Prohibition on Active Dealing
Dealing during a Trading Period is subject to the prohibition that an employee and director must not actively deal in shares with a view to deriving profit related income from that activity. “Actively Deal” for this purpose means to deal in shares in a manner which involves frequent and regular trading activity.
Confirmation of Dealing that has Occurred
The company may require an employee to provide confirmation of dealing in company securities by an employee or his/her associate(s).
Notice of Change to Trading Period or Non Trading Period
The Non Trading Period, as outlined in Rule 4.1, may be extended or shortened or another Non Trading Period may be introduced at any time by direction of the Board. Notice of such changes will be specified to employees by email and to directors by email and/or facsimile. Changes to the Non Trading Period or Trading Period are effective immediately upon the giving of such notice. Where an employee does not have email access it is the manager's responsibility to inform the employee.
Director Requirement to Report to the market . Listing Rule 3.19A
In accordance with the Agreement between directors and the company, directors are required to provide details of all changes to their interest in company shares registered in the name of the director or held on behalf of the director, directly or indirectly. The details must be provided as soon as reasonably possible after the date of the change and in any event no later that three business days after the change or another time frame which allows for compliance with the listing rule obligations.
Waiving Rules
If there are exceptional circumstances, the Chief Executive Officer or if absent, the Chairman, in their discretion may waive parts of the Dealing Rules, to allow for employees to deal.
If there are exceptional circumstance, the Chairman in consultation with the Chief Executive Officer and the Chairman of the Audit and Risk Committee, in their discretion may waive parts of the Dealing Rules, to allow directors to deal.
This discretion will be applied, taking into account the hardship of the employee or director and weighing this against any perceived detriment to the company’s reputation.
Related Parties and Relevent Interests
The restrictions on dealings by an employee or director are equally applicable to any dealings:
(a) by their spouses or de facto spouses;
(b) by or on behalf of any dependant under 18 years of age; and
(c) any other dealings in which, for the purposes of the Corporations Act, he or she is or is to be treated as “interested”. For example, if an employee or director is a trustee of a trust and is also a beneficiary of the trust, the employee or director must not purchase company shares on behalf of the trust.
It is the duty of the employee and director to seek to avoid any such dealing at a time when he or she is himself or herself prohibited from dealing.
Employment and Monitoring of Compliance
To promote understanding of the insider trading prohibition, related Corporations Act provisions and company policy, a copy of this document will be distributed to all employees and directors (present and future) and will also be available on the company’s intranet site. The induction procedures for new employees and directors must require that a copy of this document be provided to each new employee and director.
All new employees will be required to provide a completed Form of Acknowledgment to Human Resources. All new directors will be required to provide this form to Company Secretariat.
Conclusion
Compliance with the rules set out in this document is mandatory. Infringement of the insider trading provisions can attract a substantial monetary penalty, imprisonment or both.
Any employee or director who does not comply with the Dealing Rules set out in this document will be considered to have engaged in serious misconduct which may result in the termination of their engagement by the company.