Directors should be aware of, and informed about, the Corporations Act 2001 (Cth) (the Act) provisions prohibiting insider trading – Part 7.10, Division 3.
Insider trading is the trading of securities or a wider set of financial products while in possession of information:
- which is not generally available; and
- if it were, would be likely to have a material effect on the price or value of the security.
Insiders can be anyone and they do not have to be directly related to the company. However, because of the nature of their roles, directors are more likely to be in possession of ‘inside information’ so they need to exercise great care in their use and disclosure of that information. There are very severe penalties if found liable for insider trading.
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