Philippine bourse operator plans changes to insider blackout rules
by Christopher Leahy, ACGA
On 30 September, the Philippine Stock Exchange (PSE) released a consultation paper seeking stakeholder views and comments on proposed changes to Listing and Disclosure Rules and Revised Trading Rules. Two of the proposed changes are notable since they seek to tighten rules governing insiders trading a listed company’s shares around specific blackout periods.
The PSE’s existing rules on blackouts (Article VII Section 13.2) apply to directors and principal officers of a listed company and prohibit trading by such persons in the shares of a company as soon as any director and/or principal officer comes into possession of material non-public information (MNPI) up to and including two full trading days after disclosure of the MNPI by the company. The two-day trading ban is imposed to permit the market sufficient time to absorb the MNPI and for the company’s share price to react to it.
The PSE notes in its consultation paper that while the blackout prohibition applies to directors and principal officers of an issuer, it does not currently apply to the issuer itself. As the PSE notes, the issuer may well be in possession of MNPI when it deals in its own shares via share buy backs. The PSE proposed rule amendment, assuming it is adopted, thus closes an important loophole.
The PSE is also proposing to amend Article VII Section 13.2 to impose a specific blackout trading period for insiders (expanded to include the issuer itself) of 30 calendar days before announcement of any financial results of the company, including the submission of an annual or quarterly report up to and including two full trading days after disclosure.
According to the PSE announcement: “The...proposed amendments are benchmarked against the rules of the Singapore Exchange and Bursa Malaysia.” Philippine regulators tend to follow, rather than lead, ASEAN markets such as Malaysia and Singapore for CG-related rule changes, which is what has happened here it seems. But to be accurate: the proposed rule changes meet Bursa Malaysia standards at 30 days; but not SGX standards, which mandate 60 days.
So while the proposed blackout period of 30 days does not meet ACGA’s recommended best practice 60-day threshold, assuming the PSE’s proposed amendment proceeds, the change is a welcome improvement to existing rules.
One further potential amendment of note is a proposal to tighten the rule (Article V, Part A, Section 8) on the lock-up period for related parties to issues of new shares. The current rule imposes a prohibition on the sale of any shares issued to related parties from an IPO or other issue of new shares, requiring such party to enter into an agreement with the PSE not to sell any such shares for a period of 180 days after listing. The proposed amendment now mandates any such issued shares to be held in escrow via an approved escrow agent from the date of issue until 180 days after listing.
The PSE had asked for feedback from the market on its rule changes by 11 October 2024, giving just 11 days to respond—another deadline well short of best practice.
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