THE ASX has moved to allay investor fears about insider trading by drafting new disclosure rules for share trades by company directors and senior executives.
Yesterday the Australian Securities Exchange revealed listing rules that would require each company to have, and to disclose, its own trading policy, setting out the sensitive periods in which its directors and senior executives would be banned from trading shares except in ''exceptional circumstances''.
Directors and executives would need written permission to trade during the restricted periods, and companies would need to disclose to the market if a trade had taken place in such a period.
The move aims at tackling concerns about directors and executives who trade during ''blackout'' periods, such as the time between accounts being signed off and being published, in which boards hold price-sensitive data that is not known to the wider market.
The ASX said the perception that directors may be engaging in insider trading could damage the reputations of companies and had the power to undermine the integrity of the entire market.
The difficulties of detecting insider trading contributed to the ''perception risk'', it said.
A review by the ASX over a three-month period had earlier found a third of active trades by directors took place in ''blackout'' periods.
But the ASX said what was ''potentially more disturbing'' was that 2.3 per cent of relevant trades breached the trading policies of companies, and 7.8 per cent of director trades during company-imposed bans had clearance from another director, most often the chairman of the board.
In June a study commissioned by the Government called for the banning of trades by director and senior executives during blackout periods, except in exceptional circumstances. It left open the question of whether new laws were required.
Under the rules proposed by the ASX, companies would write their own policies, set out their own banned periods and define their own ''exceptional circumstances''.
''The key thing is that [the policies] would need to be disclosed to the market, and the market is best placed to pass judgment on that company's policy, not the ASX,'' a spokesman, Matthew Gibbs, said. ''Our focus is to ensure that [it is] disclosed, and then the market makes its mind up as to its suitability or otherwise.''
The Australian Institute of Company Directors welcomed the plan, saying it gave companies flexibility ''rather than prescribing blackout periods on a 'one size fits all' basis''.
Submissions on the proposed listing rules close on February 26.
