Hong Kong will become one of the most restrictive markets in the world for directors and major shareholders wishing to buy or sell shares in their companies if the stock exchange sticks to its controversial plan to extend the trading blackout period. The new rule, intended to thwart insider trading, was scheduled to go into effect yesterday but was postponed to April 1 after an outcry from lawmakers and the business community. It would make Hong Kong's blackout period longer than those in Britain, the United States, Singapore and Australia. The rule would ban directors or major shareholders of every listed company from trading its shares between the end of a financial period and the time results are announced. Many companies wait until the three-month deadline to report interim results and four months for annual results. That means insiders would not be able to trade for up to seven months a year. Currently, there is a one-month blackout before earning announcements, meaning a ban on trading for two months each year. More than 238 executives signed an open letter opposing the new blackout period as being too long. Mike Wong Ming-wai, chief executive of the Chamber of Hong Kong Listed Companies, said the exchange has sufficient rules to crack down on insider dealing. 'It is a big question mark whether Hong Kong should go to such an extreme, to extend the blackout period to become the toughest worldwide,' Mr Wong said. In Britain, directors and major shareholders are banned from trading their company's shares for 60 days before interim and annual earnings announcements, resulting in a total blackout of four months. In the US, the Securities and Exchange Commission bans directors or executive officers from trading company shares during a 60-day blackout period when there are certain administrative changes to a company's retirement plan. Singapore and Australia do not have clear blackout periods. A regulatory source said it was necessary for Hong Kong to go further than other countries. 'Unlike the US, Hong Kong does not have class-action lawsuits, so minority investors find it hard to sue directors,' the source said. 'The US and other markets also have tougher rules to fight against insider dealing than Hong Kong. 'More importantly, US and British companies have a culture of reporting any price-sensitive news or negative events to the public in a timely manner. Without such a continuous disclosure culture, it is necessary for Hong Kong to adopt a prolonged blackout period to crack down on insider dealing.' Hong Kong Institute of Certified Public Accountants president Paul Winkelmann, a partner at PricewaterhouseCoopers who holds no company directorships, supports Hong Kong's need for a longer blackout period. He said the US, Australia and Singapore have tough rules to crack down on insider trading. 'Unlike these overseas markets, Hong Kong lacks other tools to crack down on insider dealing,' he said. 'Under such circumstances, it would be better for Hong Kong to have an extended blackout period.' Mr Winkelmann said the new rules would also encourage companies to report their results earlier than the deadlines require, since the earlier companies announce results, the earlier insiders can trade their shares. He said British companies usually issue results within two months of the end of a reporting period. In the US, Singapore and Australia, companies report quarterly, unlike Hong Kong, where companies report every six months. Mr Winkelmann said he thought it strange that companies did not react to the rule earlier. Only 58 companies responded to the stock exchange consultation regarding the rule change. However, on Monday, three days before the rule was originally scheduled to become effective, executives at 238 listed companies published an open letter in newspapers opposing the rule change. Several high-profile corporate leaders, including Bank of East Asia chairman and chief executive David Li Kwok-po and Orient Overseas (International) chairman Tung Chee-chen, have publicly objected to the rule change. Edward Chow Kwong-fai, chairman of Growth Enterprise Market-listed CIG Yangtze Ports Capital, said many directors overlooked the proposal because it was one of many suggested rule changes in the consultation paper. 'I personally do not agree with the extension of the blackout period,' he said. 'As managers of the listed companies, the directors would know information about the companies and the long-term development plan of their companies. 'The blackout period cannot eliminate insider trading completely. What the regulators should do is to trace those insiders instead of extending the blackout period for all directors.' Mr Chow also said the blackout period should end when a company released a profit warning. 'Many H shares, according to mainland rules, give a profit warning if their profit will fall or rise more than 50 per cent from a year earlier,' he said. 'Directors should be allowed to trade stocks once they have told the public the information.' Stephen Cheung Yan-leung, a professor at City University of Hong Kong, however, agreed Hong Kong companies should face a tougher blackout period than other countries. 'Many Hong Kong-listed companies are family owned,' he said. 'The management and the majority shareholders are the same group of people.' That provides more opportunity and incentive for insider trading. This is different from other overseas markets, where the majority shareholders are often different from management, Mr Cheung said.