Concern with the use of insider information in the capital market is nothing new. In 1942, the Securities and Exchange Commission (SEC) created one of the first legal mechanisms (Rule 10-b 5) to restrict insider trading. In Brazil, this practice has been acknowledged by law since 1965, when the Capital Market Act (Law 4,728/65) was sanctioned. In its third article, the diploma ruled that “it falls to the Central Bank (...) to verify the use of information undisclosed to the public for one’s own benefit or that of third parties, by shareholders or persons who, due to the positions they hold, may have access to such”.

Since then, countless laws and instructions providing for the subject have come into force and been revoked. Currently, the regulation and inspection of stock market operations are handled by the CVM (the securities and exchange commission of Brazil). The autarchy’s Instruction 358, published in 2002, introduced a stock trading policy for companies, but its application is only optional.

According to IBGC’s Code of Best Corporate Governance Practices, “in addition to respecting the country’s laws, every company must have a code of conduct that will bind administrators and employees. This code should provide for the relationships among stakeholders and cover the company’s stock trading policy, among other subjects”.

Thus, following the principles that govern Comply or Explain, this month CAPITAL ABERTO decided to survey which companies chose not to follow that recommendation. This space contains the companies identified and their respective arguments, when presented.

In order to compose the sample for the survey, we selected the 80 companies with the highest liquidity up to September 8, 2008, according to Economática. Using the information available on CVM’s website, we saw that ten of them do not have a stock trading policy either recorded among their company documents, or presented jointly with their policy for the disclosure of relevant information.

Trading in a company’s own shares is burdensome to the regulator. Last July, the two major executives of Iochpe-Maxion signed a term of commitment with CVM in which they agreed to pay over R$ 230,000 to conclude an administrative proceeding on wrongful use of insider information. The case referred to disclosure of the results for 2Q 2003. Iochpe does not have a trading policy. Though the company is not included in the sample, we made an exception and conducted an inquiry for Comply or Explain. Via e-mail, their Investor Relations department argued that their conduct for information use can be found in the disclosure policy and ethics code available in their website’s corporate governance section.