Do executives of listed companies actually care about what they say to whom and when? Standards of regulation and oversight in African markets are lower than in international markets so why should listed companies in Africa care?
If they want to build a reputation with foreign investors they should. Show that they understand and regulate the dissemination of information internally. Does your company have an insider trading policy to regulate trading in your shares and information on your shares? If not, a sample policy appears below. If you do, compare it to this. Also check what your stock exchange rules say.
If this does not apply to you then think about what the policy is trying to achieve and see if there is something that can be added that is relevant to your company.
It shall be in violation of Group Policy to trade The Group Shares based on possession of Material Non-public Information.
Application of Insider Trading Policy
The Policy applies to all Directors, Management and employees of The Group who are in possession of Material Non-public Information (as defined below). In addition, the Policy applies to any person who may have Material Non-public Information of The Group, including consultants, contractors, and family members of The Group employees. These groups of people are sometimes referred to in this Policy as “Insiders”.
Any person who possesses Material Non-public Information regarding The Group is an Insider for so long as the information is not publicly known. Any such person can be an Insider from time-to-time based on his/her possession of Material Non-public Information, and would at those times be subject to this Policy.
Definition of Material Non-public Information
Material Non-public Information is information that has not been publicly released by The Group and which is material to The Group’s business. Information is material if there is a reasonable likelihood that it would be considered important by an investor when making an investment decision about The Group. The Group’s half year financial results are one example of potentially material information. Thus, if an Insider is in possession of any such financial information at or near the end of a fiscal reporting period, and prior to public announcement, they should not trade in The Group’s Shares.
If an Insider is in any doubt as to whether they are in possession of potentially material non-public information they are obliged to contact The Chief Executive Officer, who is responsible for STOCK EXCHANGE compliance for clearance prior to trading in The Group’s Shares.
While it may be difficult under this policy to determine whether particular non-public information is material, there are various categories of information that are particularly sensitive and, as a general rule, should always be considered potentially material. Examples of such information may include:
o Financial results
o Projections of future earnings or losses
o News of a pending or proposed merger or acquisition
o News of the disposal of a subsidiary o Impending bankruptcy or financial liquidity problems
o Gain or loss of a substantial customer or supplier
o New product announcements of a significant nature
o Significant product defects or modifications
o Significant pricing changes
o Share splits
o New equity or debt offerings
o Significant litigation exposure due to actual or threatened litigation
o Major changes in senior management.
Either positive or negative information may be material.
Trading on Material Non-public Information
Insiders are prohibited from purchasing or selling shares of The Group until the third Trading Day following the public disclosure of that information, or until the information is no longer material.
Insider Trading Liability
Any Insider, who purchases or sells The Group’s Shares based on Material Non-public Information regarding The Group, will be liable for disciplinary action and summary dismissal.
Individual Responsibility
Every director, manager, and employee has the individual responsibility to comply with this Policy. The guidelines set forth in this Policy with respect to the definition of Material Non-public Information are guidelines only, and appropriate judgment should be exercised in connection with any trade in The Group’s shares. An Insider is prohibited from purchasing or selling The Group’s shares even if he or she planned to make the transaction before learning of the Material Non-public Information and even though the Insider believes he or she may suffer an economic loss or forego an anticipated profit by waiting.
Material Non-public Information Regarding Other Companies
This Policy and the guidelines described herein also apply to Material Non-public Information relating to other companies, including The Group’s customers, vendors or suppliers. All employees should treat Material Non-public Information about The Group’s customers, vendors or suppliers with the same care as is required with respect to information related directly to The Group and should not use this Material Non-public Information to trade in the shares of The Group’s business partners.
Tipping
Insiders shall not disclose, or provide “tips” regarding Material Non-public Information concerning The Group or any of its customers, vendors or suppliers to any other person (including family members). As noted above, anyone to whom such a tip is given automatically becomes an Insider.
(B) POLICY AGAINST SHORT SALES
No Director, manager or employee of The Group, and no member of the immediate family or household of any such person, shall, directly or indirectly, (including through an entity in which they are beneficially interested) sell any shares of The Group that such individual does not own (a “Short Sale”).
(C) DIRECTORS AND MANAGERS TRADING POLICY
Pre-clearance of Trades
The Group has determined that all Directors, and Managers should refrain from trading in The Group’s shares, even during the Permitted Trading Window (see below), without first complying with The Group’s “pre-clearance” process. Each Director and manager should contact the office of the Chief Executive Officer, who is responsible for STOCK EXCHANGE Compliance, prior to any purchase or sale of The Group’s shares. The Group may find it necessary, from time to time, to require compliance with the pre-clearance process from certain employees, consultants and contractors other than, and in addition to, Directors and managers. The Chief Executive Officer will refer the application for pre-clearance together with a recommendation thereon to the appropriate approving authority which is:
• in the case of managers, the Chief Executive Officer himself
• in the case of Directors, the Chairman of the Board
• in the case of the Chairman, the Board of Directors
Permitted Trading Window for Directors and Managers
Directors and managers of The Group may only purchase or sell The Group’s shares during the Permitted Trading Window (subject to pre-clearance in accordance with section IX above).
The Permitted Trading Window is the period in any fiscal reporting period commencing at the close of business on the second “Trading Day” following the date of public disclosure of the financial results for a particular fiscal half year or year and continuing until one fiscal month prior to the end of the next fiscal reporting period. A “Trading Day” is defined as a day on which the Stock Exchange is open for trading. If public disclosure occurs on a Trading Day before the market closes, then the date of disclosure shall be the first Trading Day following the public disclosure.
If public disclosure occurs after the market closes on a Trading Day, the first Trading Day shall be the day following the date of public disclosure. It should be noted, however, that even during the Permitted Trading Window, any person possessing Material Non-public Information concerning The Group may not engage in any transactions in The Group’s shares until such information has been known publicly for at least two Trading Days, whether or not The Group has recommended a suspension of trading to that person. Trading in The Group’s shares during the Permitted Trading Window should not be considered a “safe harbor” (A provision in securities law that excuses liability if the attempt to comply in good faith can be demonstrated), and all Directors, managers and other persons should use good judgment at all times. Notwithstanding the Permitted Trading Window, Directors and managers may not trade in the company’s shares at any time when The Group is trading under a cautionary announcement. The safest period for trading in The Group’s shares, assuming the absence of Material Non-public Information or a Cautionary Announcement, is probably the first thirty days of the Permitted Trading Window. The purpose behind this suggested “Self-Imposed Trading Window” period is to help establish a diligent effort to avoid any improper transaction.
Notification of trades in The Group’s shares by Directors and Managers
Directors and managers are required to notify The Chief Executive Officer of all transactions in The Group’s shares undertaken by them or on their behalf. Such notification should be received no later than 24 hours after the transaction has been effected and should disclose the following information:
• date on which the transaction was effected
• nature of the transaction
• number of shares transacted and the price at which transacted
• nature and extent of the director’s or manager’s interest in the transaction. Information on transactions by Directors in The Group’s shares will be disclosed to the STOCK EXCHANGE in accordance with the STOCK EXCHANGE Listing Requirements.
Definition of Manager
For the purposes of this policy “Manager” is defined to include all manager grade staff, secretaries of directors, and all finance department staff of grade Officer (or equivalent) and above.
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