The purpose of this section is to ban speculative dealing in the shares of quoted companies by people in possession of inside information. The section makes it an offence for a director to buy options in listed shares, or debentures, of a company of which he is a director, or of related companies. Specifically, a director who buys a right to call for delivery or a right to make delivery or, at his election, a right either to call for or to make delivery at a specified price and within a specified time of a specified number of listed shares or debentures of his company commits an offence.
There is an important distinction to be made here. The section does not apply to a director buying a right to subscribe for shares or debentures, not does it apply to the buying of debentures which carry a right to subscribe for or convert into shares — the terms of options such as these are clearly a matter for the company — what is being tackled here is speculative dealing in options. By virtue of section 26, the prohibition on speculative dealing in options will also apply to shadow directors and section 30 following extends the prohibition also to such dealings by spouses and children of directors.
