PLANS by the Australian Securities Exchange to widen directors' share trading disclosures and curb insider trading may achieve the opposite of their aim and instead provoke speculative trading, according to an influential lobby group.
Chartered Secretaries Australia, which had a recent win in Canberra over its push for changes to the law covering who can access company share registers, has now turned its sights on the ASX's latest bid to improve market integrity and deal with insider trading.
In December the exchange opened up for discussion a series of proposed changes to the disclosure regime surrounding how and when directors trade in their companies' stock.
While most companies already have ''blackout'' periods when trading by directors and management is forbidden, such as the weeks before the release of trading results, the ASX wants to go a step further.
It wants a regime in which company officers have to disclose not just how and when they have traded shares, but whether the transactions were during a ''prohibited period'' - and whether there was written clearance from the company for the trading.
The aim is to cover instances in which directors are forced to trade their shares, for reasons such as financial hardship or a court order, at a time when some form of unusual corporate activity is occurring inside the company but the activity is not at a stage that would normally trigger public disclosure.
CSA chief executive Tim Sheehy said that while companies needed an internal mechanism for controlling and monitoring that kind of trading, disclosing it could ''set in train ill-founded rumours that are not in the best interests of the market''.
''The fact that a director is trading in a company-specified prohibited period, other than the results blackout period, to meet genuine and personal financial obligations, could set in train a whole lot of speculation as to what the company is up to - is a deal in the wind?'' Mr Sheehy said.
''That is a significant and dangerous unintended consequence of the proposed rule.''
Mr Sheehy said the CSA would be happy if companies maintained their own internal reporting systems to monitor and account for that type of trading, made available for scrutiny by regulators but not made public. He said the CSA submission to the ASX came at the subject from the companies' point of view, and was not about protecting directors from having to publicly disclose when they were in financial or legal strife.
The ASX's proposed listing rule changes revive an unresolved debate on the issue of at what point talks between a listed company and other parties graduate from being mere informal discussions to having sufficient weight to trigger the continuous disclosure requirements.
