In my opinion.
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On 7 June 2018 regarding Klaus Eckhof and earlier on 15 September 2017 regarding both Klaus Eckhof and Patrick Flint, AVZ acted as agent in providing Appendix 3Y Change of Director's Interest Notices to the ASX market announcements office.
On both occasions next to the first question in Part 3 of the 3Y, "Were the interests in the securities or contracts detailed above traded during a +closed period where prior written clearance was required?" the single word "No" is recorded.
Now a +closed period is defined in the ASX Listing Rules Ch 19 Interpretation and definitions as a "fixed period in the +trading policy of an entity when an entity's +key management personnel are prohibited from trading in the entities securities." This term was introduced into the listing rules in January 2011 so at the same time as Listing Rule 12.9 which is that "an entity must have a +trading policy that complies with the requirements of ASX listing rule 12.12. [and] An entity must give its +trading policy to the +market announcements office for release to the market."
AVZ's trading policy, available on its website, is the Security Trading Policy, and very notably it has not been updated according to the bottom of its last page since September 2010.
This is despite that Avonlea Minerals Limited has changed its name to AVZ Minerals Ltd, (still with the ASX code - AVZ), changed the role of its Chairman from Non Executive to Executive, changed the nature of the minerals and the countries in which it is exploring for and that none of the current directors of AVZ were directors of AVZ at the time of the last update to the Security Trading Policy in 2010. Klaus Echkof has had various Managing Director executive and non executive director roles and the Chairman position since 2014. Time enough it would seem to review the Security Trading Policy and to amend it if he wanted to.
Listing Rule 12.10 states "Where an entity makes a material change to the +trading policy such an entity must give the amended +trading policy to the +market announcements office for release to the market within 5 + business days of the material changes taking effect."
In the more than 5 business days that have passed since the 7 June 2018 Appendix 3Y no such announcement of material changes have been made.
Perhaps because the Security Trading Policy predates the definition of +closed period it doesn't mention closed period as such in the policy itself however section 3.1 (a) and (b) covers two categories of Non Trading Periods which are certainly capable of fitting into the definition of a closed period in that they are fixed and as written clearly intended to prohibit key management personnel from trading the entities securities.
Here is section 3.1 No Dealing Permitted During a Non Trading Period
Subject to the policy, employees and directors are permitted to deal in AVZ securities throughout the year except during the periods identified below. In setting these times, the Board is cognisant that at this stage AVZ is not a trading entity but rather is in exploration and development mode. Accordingly the prescribed times for non trading are relevant to its current state and these will be amended at the appropriate time to reflect the Company's transition to reflect the Company's transition to a trading operation.
In summary the periods where trading is forbidden are;
(a) the commencement of the 2 week period preceding the announcement of: (i) the annual results; and (ii) the half yearly results; and (iii) the quarterly cash flow statements released to the ASX in the form of Appendix 5B.
ending once the statement has been lodged on the ASX announcements platform, and;
(b)prior to the making of any JORC Resource and/or Reserve Statement and ending once the statement has been lodged on the ASX announcements platform.
Each period above is referred to as a Non Trading Period. The period where dealing is permitted is called the Trading Period.
As most casual observers of AVZ would be aware AVZ has yet to make a JORC Resource and/or Reserve Statement in relation to its Manono Project so even now is still in a period prior to those things. So on the plain face of 3.1 (b) it certainly appears that Klaus Eckhof and Patrick Flint both have traded during a closed period of their trading policy and in Klaus's case more than once.
But clause 3.1 is not the only clause in the Security Trading Policy.
And the 3Y's don't say that Klaus did not trade during a closed period. That simpler question is not even put.
What follows is my analysis of how the clauses of the Security Trading Policy could have been used to allow "No" to be a technically truthful answer to the Appendix 3Y question "Were the interests in the securities or contracts detailed above traded during a +closed period where prior written clearance was required?"
Clauses -- (potentially useful clauses bolded)
Introduction
Insider Trading Prohibition
2.1 The Nature of the Prohibition
2.2 How You Become Aware of the Information is Irrelevant
2.3 Information Which Might Affect Price Value
2.4 What Does Information Include?
2.5 What Information Might Materially Affect Price or Value?
2.6 What does "Unpublished" Mean?
Dealing In Securities Issued by AVZ
3.1 No Dealing Permitted During a Non Trading Period
3.2 Notice During a Non Trading Period
3.3 Prohibition in Dealing While in Possession of Relevant Information
3.4 Prohibition in Active Dealing
3.5 Special Approval to Deal During the Non Trading Period
3.6 Confirmation of Dealing that has Occurred
3.7 Notice of change to Trading Period or Non Trading Period
3.8 Director Requirement to Report to the Market - Listing Rule 3.19A
4 Prohibition in Dealing in Financial Products issued over AVZ Securities by Third Parties
5 Waiving Rules
6 Related Parties and Relevant Interests
7 Employment and Monitoring of Compliance
8 Conclusion
Policy History
Last Review: September 2010
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3.5Special Approval to Deal During the Non Trading Period
If there are exceptional circumstances, for example a pressing financial commitment, then approval may be given by:
* the Managing Director or if absent the Company Secretary, in their discretion to an employee to deal during the Non Trading Period;
*the Chairman, in his discretion, to a director to deal during the Non Trading Period;
* the Chairman, in his discretion to the Managing Director to deal during the Non Trading Period;
* the Managing Director, in his discretion to the Chairman to deal during the Non Trading Period.
Any such approval must be obtained in advance. It cannot be given after the event.
The discretion will be applied taking into account the hardship of the employee or director and weighing this against any perceived detriment to AVZ's reputation.
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Notes: Doesn't say "prior written clearance"
Doesn't say Chairman, to a director - can't be the same person. Though see MD to Chairman implying a wiser practice.
3.7 Notice of change to Trading Period or Non Trading Period
The Non Trading Period, as outlined in Rule 3.1, may be extended or shortened or another Non Trading Period may be introduced at any time by direction of the Managing Director or the Chairman. Notice of such changes will be specified to employees by email and to directors by email and/or facsimile. Changes to the Non Trading Period or Trading Period are effective immediately upon the giving of such notice. Where an employee does not have email access it is the manager's responsibility to inform the employee.
A dealing during any such change remains subject to Rules 3.3 and 3.4.
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Notes:
1) Reading the yellowed words alone shows one possible effect of the paragraph.
2) Whilst in this case the Chairman might have to send an email or fax to himself creating a written record of the change there is nothing in the words here that indicates that such material changes to the Security Trading Policy must also be sent to the ASX market announcements office within 5 business days as per Listing Rule 12.10.
5 Waiving Rules
If there are exceptional circumstances, the Managing Director or if absent, the Company Secretary, in their discretion may waive parts of this policy to allow for employees to deal. If there are exceptional circumstances, the Chairman in consultation with the Managing Director, in his discretion may waive parts of this policy to allow directors to deal.
This discretion will be applied, taking into account the hardship of the employee or director and weighing this against any perceived detriment to AVZ's reputation.
Where a waiver has been granted the details of the same must be recorded and reported to Directors at the next Board meeting.
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Notes:
The Chairman should consult with (but not necessarily get the agreement of) the Managing Director.
No prohibition on the Chairman applying the waiver to himself.
Although the details of the waiver must be recorded and reported at the next Board meeting that occurs afterwards - there is not a requirement here for written clearance or a written record prior to the trading in exceptional circumstances taking place.
So, using 3.7 Executive Chairman Klaus might have changed the closed periods of 3.1 so the 3Y could then be true - he would not have traded during a closed period because it was no longer closed - but that would have been a material change and Klaus's Board would have been required to have submitted that change to the markets announcement office as per Listing Rule 12.10 within 5 business days of the change taking effect. Time is up and he hasn't done that.
ASX Listing Rule Guidance Note 27 states at page 19 that "changes to the fixed periods specified in the trading policy when the entity's KMP are prohibited from trading ..." would be considered by the ASX to "constitute a material change".
Using 3.5 Special Approval etc and/or 5 Waiver Rules - Executive Chairman Klaus doesn't technically require prior written clearance from anyone else - so it could truthfully be written that No he did not trade during a closed period where prior written clearance was required.
So the, last updated in 2010, Security Trading Policy if it were the only requirement AVZ on Klaus's behalf was required to consider could allow the word No to be truthfully written.
However is a 2010 Security Trading Policy (a near eight years since modified document) sufficient alone and in itself to dispatch the duty of the director and company in -
1) answering the question in the Appendix 3Y and
2) complying with the Listing Rules requirements of the ASX including 12.9 and 12.12 (which place minimum content requirements on any entities +trading policy to satisfy those minimum Listing Rules requirements and to consider the spirit intention and purpose of those rules as it is required to under Listing Rule 19.2.
Since 2011 greater emphasis is placed on prior written clearance to trading in closed or prohibited periods. Indeed it is unclear that there are any occasions at all in which it would be ever be permissible (consistent with the spirit of listing rules) for an Executive Chairman to grant himself a waiver or otherwise set aside prohibitions on trading without getting prior written clearance from someone else. My reading of the ASX Guidance Note 27 strongly suggests the answer is no - but a completely definitive statement to that exact effect is missing.
ASX Guidance Note 27 page 20 says "Implicit in the requirement for an entity to have a trading policy is that it should also have appropriate measures to ensure that its KMP are aware of, and understand, their obligations under the policy and to monitor and enforce compliance with the policy. For it not to do so would be a failure to comply with its obligation under Listing Rule 19.2 to honour the spirit, intention and purpose of the Listing Rules."
Both 3.5 and 5 of the Security Trading Policy such as it is emphasis the importance of "weighing (the exercise of any discretion or waiver for exceptional circumstances) "against any perceived detriment to AVZ's reputation",
and the final paragraph of that document states "Any ... director who does not comply with the Dealing Rules set out in this document will be considered to have engaged in serious misconduct which may result in the termination of their engagement by AVZ".
and
3) complying with the duty of care and diligence and the duty to act in good faith under sections 180 (1) and 180 (2) of the Corporations Law 2001?
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The above document has been put together as part of my legal research and as part of my learning, perhaps self empowering and likely response to Klaus Eckhof's action which became known to the market on 7 June. I believe I have read most of the posts from other HotCopper AVZ message board members from around 15 September 2017 as well as around 7 June 2018 and very much respect the opinions of several posters with whom I now feel my research makes me disagree to what they posted at those times. If there are any errors in this post I'd be interested to hear about them as my researching is continuing and I believe Klaus Eckhof like anyone else deserves a fair go when measured against the facts. I do think AVZ needs to change in the best interest of shareholders.
AVZ Price at posting:
9.1¢ Sentiment: None Disclosure: Not Held
(20min delay)