At last - revised directors and officers disclosure regime

Stephen Layburn, Senior Associate | Wednesday 17 September 2008

Amendments simplifying disclosure obligations under the Securities Markets (Disclosure of Relevant Interests by Directors and Officers) Regulations are set to come into force on 9 October 2008.

Earlier this year Cabinet agreed to amend the disclosure regime under the Securities Markets (Disclosure of Relevant Interests by Directors and Officers) Regulations 2003 (D & O Regulations) to reduce compliance costs. Draft amending regulations were then circulated for consultation and, on 11 September, regulations amending the D & O Regulations were gazetted.

The D & O Regulations were made under Part 2 of the Securities Markets Act 1988 and require directors and officers of public issuers to disclose relevant interests and dealings in securities of the public issuer (and any related body corporate). Disclosures made under the D & O Regulations are designed to help with the monitoring of possible insider trading activities and market manipulation.

The D & O Regulations have been in force since 2004 and impose a significant compliance burden due to open-ended wording that currently requires disclosure of share dealings not only by directors, but also by officers who "take part in" in the management of a listed company.

The amendments to the D & O Regulations simplify the disclosure obligations as they relate to company officers by narrowing the range of people caught by the definition of "officer" so that it includes only second tier managers and above.

The amended definition of "officer" now allows for a simple two tier enquiry to identify the range of people who are classified as officers of a public issuer and, as a result, required to make disclosures of share dealings. Those two tiers are:

First tier: persons who report directly to the Board; and

Second tier: persons who report directly to a person who reports directly to the Board.

In keeping with the objective of simplifying and reducing the compliance burden imposed by the D & O Regulations, the amendments which come in to force on 9 October also:

• provide two separate disclosure forms - one for initial disclosure and the other for ongoing disclosure;

• remove the prohibition on disclosing both multiple acquisitions and multiple disposals on the same form – so long as all acquisitions and disclosures always take place in a five trading day period;

• allow multiple transactions to be recorded on the same form – so long as they take place within a five trading day period; and

• allow persons authorised by the relevant director or officer making disclosure to sign the disclosure form on his or her behalf.

The amendments represent a significant step towards reducing the compliance burden imposed by the D & O Regulations that have often been characterised as:

• providing little incremental improvement in the quality of disclosures about significant changes in the trading patterns in the securities of listed issuers; and

• being out of step with similar disclosures in Australia, which are only required to be made by directors.

To view the amendments to the D & O Regulations click here.

 

For further information please contact:

Stephen Layburn
Senior Associate