DIRECTORS’ SHARE TRADING COMES INTO QUESTION
issue 82 27Oct05
It is pretty much a given in this world that if directors of listed companies fail to register a sale of shares in the company in the statutory time allotted, immediate assumptions of some form of insider trading will be made.
This may prove to be far from the truth, and given directors are (a) often only allowed small windows of opportunity for share sales and (b) do not wish to create some sense of panic from the revelation that a director has seen fi t to sell (what does he know?), one can understand why the subject of director’s sales is a touchy one all round.
But why do directors often fail to make the required disclosures? The Australian Securities and Investment Commission (ASIC) has been forced to undergo a crackdown on such failures after finding the problem is now “widespread”. While some disclosures have been understandably a couple
of days behind, there is a signifi cant level of disclosures which are late by weeks or months.
The Australian Financial Review reports a report by the BT Governance Advisory Service, on behalf of six superannuation funds, has found that 60% of the largest 200 listed companies had failed to meet the basic disclosure rules. Under the Corporations Act, directors must notify the market within 14 days of changes in their holdings, while under the ASX listing rules they must notify within 5 days.
The penalty for the breach is a mere $1,000. This might explain a lot. Or three months in gaol mind, but this has never been imposed. Given in some cases the share sales in question have occurred prior to results announcements, maybe an ASIC crackdown could be supported by some more signifi cant penalties. Over to you John.