Australia: Insider trading and continuous disclosure - how market sensitive are Hamish and Andy? - 10 September 2015

In the wake of the recent ASX market correction, radio comedy star pairing, Hamish and Andy, asked listeners to ring in and demonstrate how ignorant they were of stock market jargon by challenging participants to construct a sentence using as many market related terms as possible in one sentence. The sentence with the most words and least meaning was declared the winner by Hamish. It is therefore somewhat ironic that the market sensitivity of Hamish and Andy or, more accurately, the duo's star power, is now reportedly the subject of ASIC investigation.

Tuesday's Australian Financial Review1 (AFR), reported that the corporate regulator, is investigating director share trading at Southern Cross Media Group (Southern Cross) occurring in the days prior to Southern Cross's announcement on 29 October 2014 of it signing up Hamish and Andy to fill the lucrative drive time radio slot on Sydney's 2DayFM, a radio station owned by Southern Cross.

It is reported that former Southern Cross chairman, Max Moore-Wilton acquired $250,000 worth of shares in the listed Southern Cross on 24 October while the deputy chairman acquired approximately $100,000 worth of shares on 27 October.

The Southern Cross share price increased by 16 per cent, in the week Southern Cross confirmed the signing of the comedy duo, sparking questions about the directors' trading and continuous disclosure

In this alert, Partner Michael Hansel and Senior Associate Katherine Hammond highlight the corporate governance lessons that listed companies and their directors can draw from the scrutiny brought on Southern Cross, even though there has been no comment from the regulator (ASIC) or any finding of wrongdoing.

Key points

  1. The continuous disclosure regime requires that, subject to limited exceptions, a listed company is required to immediately disclose any information concerning it that a reasonable person would expect to have a material effect on the price of a listed company's securities (Market Sensitive Information). Relevantly, an exception applies so that a company will generally not be required to disclose Market Sensitive Information where it is confidential and a matter of supposition or insufficiently definite.
  2. Insider trading laws mean that directors must not trade financial products with, procure trading with or communicate for the purpose of a person trading with, undisclosed Market Sensitive Information ("inside information").
  3. Listed companies must have a trading policy under the ASX Listing Rules, and directors (and other key management personnel (KMP)2) are still exposed to the insider trading laws even if the share trade was during a permitted period under the trading policy and even if the trade has been sanctioned by the board.
  4. Directors must also be mindful of the market perception and associated potential repercussions of any share trade notwithstanding that they may not in fact be in possession of undisclosed Market Sensitive Information.

The Australian Corporations Act3 imposes heavy penalties on persons found to be guilty of insider trading – up to 10 years jail and/or $765,000 in fines may be imposed. Insider trading occurs when a person trades in the listed securities in possession of inside information. Inside information is any information that is generally not available and if that information were available, a reasonable person would expect it to have a material effect on the price of the relevant company's shares. Information for the purposes of this provision includes matters of supposition and other matters that are insufficiently definite to warrant public disclosure being made.

Under the continuous disclosure rules of the ASX and Corporations Act, Southern Cross is required to publicly disclose, by ASX announcement, any information concerning it that a reasonable person would expect to have a material effect on a price or value of its securities. However no disclosure is required to be made if the matter in question is confidential and subject to supposition or is insufficiently definite to warrant public disclosure being made.

The AFR reported the trading by the directors in question took place during a designated trading window under Southern Cross' trading policy following the Southern Cross AGM.

For trading to have occurred in accordance with the trading policy and the insider trading laws, whether or not the trade was during a "designated trading window" under the Southern Cross trading policy, the directors must not, at the time of the trade, have been in possession of any "inside information".

Any investigation carried on by ASIC would likely include an examination of the status of information relating to the signing of Hamish and Andy on the trading days leading up to the formal announcement on 29 October, whether that information constituted Market Senstive Information requiring disclosure under the continuous disclosure regime, and whether that information could constitute inside information.

Reports of this investigation follow the recent high profile investigation and subsequent clearance by ASIC of insider trading allegations levelled at Channel 9 CEO David Gyngell in the wake of his sale of more than $1.5 million worth of Channel 9 shares in the weeks leading up to a profit warning by that media company.

The reported investigation of Southern Cross highlights the critical importance that needs to be placed on listed company boards in ensuring that:

  1. its continuous disclosure obligations are discharged promptly and without delay; and
  2. the board satisfies its share trading policy which should, amongst other things, prohibit the trading of securities where inside information or the appearance of inside information may be known by the board and its executives, notwithstanding that the board and executives would otherwise be permitted to trade during a trading window under the policy.

The AFR also reported that it is believed that Southern Cross engaged an industry expert to assess whether Hamish and Andy's signing was in fact market sensitive.

Whilst engaging of such an industry expert may ultimately assist Southern Cross in substantiating the position that the information was, at the time of the trades, not market sensitive, such measures, whilst probative, do not provide an automatic and complete shield from regulatory scrutiny or market criticism. Director trades prior to the release of information that is arguably market sensitive are viewed forensically through the eyes of disgruntled investors and motivated regulators and should always be initiated with the utmost caution and vigilance.

  1. 13 Tips for company directors to comply with ASX's new continuous disclosure rules - 19 March 2013
  2. Continuous disclosure crackdown: five important tips for listed companies and directors - 1 August 2013
  3. Seven Corporate Governance Lessons from David Jones - 28 February 2014
  4. ASIC crackdown on analyst briefings – 10 tips for listed companies handling confidential market sensitive information - 5 June 2014
  5. Crackdown on insider trading goes beyond shares - 10 June 2014
  6. Christmas in jail for perpetrators of Australia's worst case of insider trading - 18 December 2014
  7. Record seven year jail sentence for perpetrator of Australia's worst instance of insider trading - 18 March 2015
  8. 8 key tips around proposed changes to continuous disclosure regime to do with earnings guidance, analysts, forecasts and briefings - 21 April 2015

Footnotes

1 Australian Financial Review, Tuesday, 8 September 2015, StreetTalk, page 14; The Australian, Wednesday 9 September 2015, ASIC probes Southern Cross directors over share trades (online).

2 As defined in Accounting Standard AASB 124 Related Party Disclosure.

3 Corporations Act 2001 (Cth).

© HopgoodGanim Lawyers

Award-winning law firm HopgoodGanim offers commercially-focused advice, coupled with reliable and responsive service, to clients throughout Australia and across international borders.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Katherine Hammond
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.