Examining 'Questionable' Trading by Insiders : Corporate Governance Disclosures and Securities Trading Policies

This article examines four 'questionable' trading practices "” short selling, short-term dealing, securities hedging and the holding of margin loans over company securities "” and whether listed company directors can engage in those practices. The Australian Securities Exchange (ASX) suggests listed companies consider these practices carefully when drafting securities trading policies but does not recommend that they be prohibited or restricted. These four trading practices will be analysed, and existing disclosure and corporate governance requirements will be discussed, followed by a study of the securities trading policies of the ASX 100 to determine how companies regulate these practices for company directors and if there are any observable patterns by market capitalisation or industry sector. This article concludes with recommendations for appropriate law reform.