Chinese walls (Section 2(h) of the Market Abuse (Financial Supervision
Act) Decree)

The conduct or effecting of a transaction by employees of a legal entity that is in
possession of inside information is exempt from the prohibition of the use of
inside information if these employees are only in possession of information
regarding trading. Situations can arise in which persons working for an issuer
that is trading (and therefore the issuer itself) are in possession of inside
information regarding the issuer to which the financial instruments being
traded relate; however those who are actually involved in the conduct or
effecting of the transaction are not aware of this information.

There can be several variations of this situation, For example, the lending
department of a lending institution (and therefore the lending institution itself)
is usually in possession of inside information regarding its clients. If the
securities department of this lender were to trade in financial instruments
relating to one of its clients, the lending institution would be acting in breach of
Section 5:56 Wft even if the securities department was not in possession of the
information in question.

There is also the situation in which, for instance, senior managers or managing
directors of a lending institution listed on a market for financial instruments are
in possession of inside information relating to their own company while the
securities department of this lending institution is not. In this situation as well,
under Section 5:56 Wft the persons concerned in the securities department are
not permitted to trade in financial instruments relating to their own company,
even though this is part of the normal activities of this department.

These situations do not qualify for the exemption for intermediaries in the
context of professional trading (Section 2(g) of the Market Abuse (Financial
Supervision Act) Decree). In these situations the inside information that the
intermediary (the lending institution) possesses does not exclusively relate to
trading, it also concerns the legal entity to which the financial instruments
relate.

Since it is not the intention to make such transactions impossible (since this
concerns a normal conduct of business), an exemption applies here. For the
record, it should be noted that an appeal to this exemption cannot be made
simply on the basis of a reference to the existence of so-called ‘Chinese walls’. It
must be demonstrated in the specific case that these ‘Chinese walls’ had also
been effective in preventing the leakage of the information.


The Authority for the Financial Markets
T +31(0)20 797 2000 | F +31(0)20 797 3800
Postbus 11723 | 1001 GS AMSTERDAM

www.afm.nl

The text in this brochure has been compiled with care and is informative in nature. No rights may
be derived from it. Decisions taken at national and international level may mean that the text is no
longer fully up-to-date when you read it. The AFM, the Netherlands Authority for the Financial
Markets, is not responsible or liable for any consequences - such as losses incurred or lost profits —
resulting from any action taken pursuant to information in this brochure.

Amsterdam, April 2011


“AFM

Market manipulation

Sa



6 __ Insider lists

61 The obligation

An issuer domiciled in the Netherlands, an issuer domiciled in another Member
State or in a non-EU Member State (with financial instruments admitted to
trading in the Netherlands) and any party acting for or on behalf of the issuer
must maintain a list of its employees who regularly or occasionally can have
access to inside information (the ‘insider list’). This includes the persons directly
employed by the issuer, but also lawyers, auditors and other contractors (Section
5:59(1) Wft and Section 10 of the Market Abuse (Financial Supervision Act)
Decree). The issuer shall inform these persons of the relevant prohibitions and
the level of the sanctions entailed by their violation.

The maintenance of the insider list is designed to protect the integrity of the
market. The lists can be useful to issuers to keep track of the information that
qualifies as inside and thereby comply with their statutory obligations. The lists
can moreover be a useful resource for the regulator in the conduct of its
supervision.

6.2 Content and updating of the list
The insider list shall contain the following information:
a_ the names of all persons who regularly or occasionally may have knowledge
of inside information;
b_ the reasons why these persons appear on the list;
c the dates on which the list was compiled and updated. The list must be
updated as quickly as possible if:
a the reason why a person who appears on the list has changed;
b a person needs to be added to the list;
¢ a person appearing on the list no longer has access to inside information
The list must be archived (in electronic form, accessible and secured) for at least
five years after it is compiled or updated. The outdated information must also
be archived.

The ‘reason why a person appears on the list’ could for instance be a statement
of the transaction or project in which the person concerned is involved. The
knowledge that people have access to changes, and it is not practically feasible
for example within a particular project to update the details of who had access
to what inside information and when this was the case.

26


The Authority for the Financial Markets
T +31(0)20 797 2000 | F +31(0)20 797 3800
Postbus 11723 | 1001 GS AMSTERDAM

www.afm.nl

The text in this brochure has been compiled with care and is informative in nature. No rights may
be derived from it. Decisions taken at national and international level may mean that the text is no
longer fully up-to-date when you read it. The AFM, the Netherlands Authority for the Financial
Markets, is not responsible or liable for any consequences - such as losses incurred or lost profits -
resulting from any action taken pursuant to information in this brochure.

Amsterdam, April 2011


misled is not a factor in the determination of whether the market has been
manipulated.

Action compared to ‘transaction’ or ‘strategy’

Market manipulation is not defined as a single transaction or order. It concerns an
action, defined as one or several transactions or orders, either in combination with
other conduct apart from the transaction, or not. This other conduct may concern the
dissemination of news, the reporting or failure to report a position, etc. The issue is the
totality of actions that collectively form a strategy to manipulate the market. Whether
the transactions ultimately lead to a profit, an avoidance of loss or another benefit is not
relevant. A party operating from London who disseminates false information in the
Netherlands with a view to realising a benefit in the German market is therefore
punishable in the Netherlands.

The term ‘market’

The term ‘market’ used in this brochure does not refer to one specific technical or legal
trading platform. Market in this context means the meeting of supply and demand,
regardless of whether this occurs on one or more platforms.

‘Large-scale’

Some of the examples given mention ‘large-scale buying or selling’. What is considered
‘large-scale’ cannot always be defined in advance; this is determined by the size of the
trading compared to the market as a whole at the time or during the period that the
trading takes place. Furthermore, some market participants, most notably liquidity
providers and market makers, have a role that compels them to buy or sell large
volumes of financial instruments. Trading is described as large-scale if at the time it
takes place the price or unfair transaction conditions can be determined exclusively or
imposed on other market participants.

The role of previously established investment or risk management policy

A previously established investment policy, risk management policy or investment
mandate can force an asset manager to take actions that strictly speaking could be
described as market manipulation. These cases can frequently involve legitimate
reasons, and therefore the actions may possibly not be considered as market
manipulation.

This does not change the fact that when determining such policy or concluding new
investment mandates, investment firms are expected to comply with the rules applying
to the prevention of market abuse and to the conduct in markets for financial
instruments (as defined in Section 5.4 Wft), and must avoid market manipulation.
Furthermore, such a policy or mandate can never be a licence to manipulate the market
with impunity; the policy or mandate itself may not be designed to permit market
manipulation.


The Authority for the Financial Markets

The AFM promotes fairness and transparency within financial markets. We are the independent
supervisory authority for the savings, lending, investment and insurance markets. The AFM
promotes the conscientious provision of financial services to consumers and supervises the honest
and efficient operation of the capital markets. Our aim is to improve consumers' and the business
sector's confidence in the financial markets, both in the Netherlands and abroad. in performing
this task the AFM contributes to the prosperity and economic reputation of the Netherlands.

The AFM operates in two areas:

Financial services

The AFM promotes due care in the provision of financial services to consumers. Businesses and
persons who provide financial services must be experts in their field, reliable and ethical. The
information provided by financial undertakings and pension providers shall be accurate, clear and
not misleading. Companies must act in the interests of their clients; a duty of care rests on them.

Capital markets

The AFM promotes the fair and efficient operation of the capital markets, on which investors can
rely. We enforce the rules for participants in the markets for equities and other securities. Market
abuse - use of inside information, market manipulation or misrepresentation - is forbidden. Listed
companies must publish inside information correctly and in a timely manner. We enforce the rules
for the issuance of securities and public takeover bids, for financial reporting and for auditors
responsible for auditing this reporting.


3__Examples

The European Market Abuse Directive and the explanation to Section 5:58 Wft state
certain specific examples of practices that qualify as market manipulation or trading
with inside information. In addition, the collective body of European regulators CESR
(the Committee of European Securities Regulators) has compiled a list of practices
that, under certain conditions and circumstances, can be considered by the European
regulators to constitute market manipulation.

The following examples are quoted from, among others, the above-mentioned
sources.

Examples of potential market manipulation

a) Transactions or orders giving an incorrect or misleading signal:

¢ Entering into arrangements for the sale or purchase of financial instruments
where there is no change in beneficial interests or market risk or where the
transfer of beneficial interest or market risk is only between parties who are
acting in concert or collusion (other than repo transactions and securities
lending).

¢ After institutions have been allocated financial instruments in the primary
offering, they purchase further tranches of these instruments when trading
begins in order to force the price to an artificial level and generate interest from
other investors, at which point they sell their holdings.

¢ The purchase or sale of financial instruments at the close of the market in an
effort to alter the closing price of the financial instrument concerned.

¢ The entrering of orders which are higher or lower than the previous order with
no intention of executing the order. The intention is to give a misleading
impression of demand for or supply of the specific financial instrument. The
orders are subsequently cancelled before they are executed.

¢ — Engaging in a transaction or series of transactions which are shown on a public
display facility to give the impression of activity or price movement in a financial
instrument.

b) Transactions or orders designed to bring or maintain a price to an artificial level:

¢ Transactions in a financial instrument on the expiration date of a related
derivative, or vice versa.

¢ Transactions in a financial instrument on the date an index is reweighted while
already holding a short or long position in order to profit from the reweighting or
change in composition of an index.

* Transactions in a financial instrument at the end of a monthly, quarterly or other
reporting period in order to improve the performance of a portfolio or financial
instrument.

¢ Taking actions to achieve an artificial price level at which other market
participants are forced to deliver, take delivery or defer delivery in order to
satisfy their obligations in relation to a financial instrument. Such actions are
taken by a party with a dominant position in a financial instrument and thus


7 Liability and duty of confidentiality

An investment firm that submits a notification in good faith is not liable for damage
suffered by a third party as a result of that notification. This could, for example,
involve damage that a client of a bank could suffer as result of a notification.
Additionally, if it retrospectively turns out that the notification was not justified - but
was submitted in good faith - the investment firm cannot be held liable for damage
caused,

In the assessment of whether the investment firm concerned acted in good faith, the
circumstances in which it was operating at the time it had to decide whether or not
to send a notification will be taken into account. One of these circumstances is the
fact that an investment firm generally has only a short period of time to consider
whether or not a notification should be submitted, as otherwise the notification
would in most cases no longer be relevant.

An investment firm submitting a notification of reasonable suspicion of trading with
inside information or market manipulation to the AFM is therefore obliged to keep
the matter confidential. This duty of confidentiality also applies with respect to the
originator of the transaction or other persons involved with the transaction. Although
the duty of confidentiality for the investment firm also applies internally,
communication between employees is permitted where this is necessary for the
exercise of their duties.


4.6 Exemptions

In addition to the possibility of delaying notification until the value of the
transactions conducted in a particular calendar year reaches EUR 5,000, the Wft
contains a number of other exemptions to the notification requirement.

Rules for the notification of control and capital holdings in issuers

The notification requirement pursuant to Section 5:60(1) Wft is met if the AFM
has been previously notified on the basis of Section 5:38(1) or (2) or Section
5:48(6) Wft, or Section 7 of the Market Abuse (Financial Supervision Act) Decree.
The notification requirement is, however, not met if a parent company reports
transactions conducted or effected by subsidiary companies. This case does not
actually involve a double notification requirement for the (legal) person
conducting or effecting the transaction. See the explanatory brochure titled
‘Managing and Supervisory Directors at Issuers’ for more information.

Discretionary management mandates

Section 8 of the Market Abuse (Financial Supervision Act) Decree states that
Section 5:60(1) Wft does not apply to transactions conducted on the basis of a
discretionary management mandate. These transactions do not therefore have
to be reported to the AFM.

In practice, directors of issuers regularly make use of discretionary management
mandates for transactions in financial instruments relating to their own
company. This kind of mandate involves a contractual relationship between the
person entitled to the financial instruments (the principal) and an asset
manager (the authorised representative). The discretionary management of the
securities portfolio is transferred to the authorised representative on this basis.
Naturally, when concluding the agreement the parties are permitted to agree on
specific provisions, such as a description of the type of financial instruments or
products in which transactions may be conducted, the objective, and the
strategy to be pursued. The authorised representative must, however, perform
all his management activities arising from the mandate without influence or
consultation with the principal, and must invest or reinvest the assets according
to his own view, while taking account of the limitations in the agreement.

Changes to the basic principles and objectives in asset management mandate
are permitted. These may involve matters such as the investment policy, the risk
profile and the reinvestment of released funds. However this is only permitted
at an abstract level so that no influence is exercised over the actual individual

22


4 Whereto should notification reports be submitted?

The investment firm should report a suspicious transaction to the regulator. In the
Netherlands, this is the AFM. If an investment firm for instance has its head office in
London and a (branch) office in the Netherlands where the suspicious transaction or
order occurs, the branch office should report the matter to the AFM (and not initially
to the UK regulator, which is the primary regulator for the investment firm —
although of course the firm can also inform the UK regulator).

Who should submit notification reports to the AFM?

A reasonable suspicion can be reported by any employee of an investment firm.
Notifications may also be submitted through the Compliance Officer. The person
submitting a specific report will be designated by the AFM as the contact person for
this report.

The AFM has developed an electronic form that can be sent to the AFM in secure
manner for the notification of suspicious transactions. The form can be used with
Acrobat Reader version 7.0 or more recent versions, and allows for fields to be
completed and electronic attachments to be added. Any investment firm can obtain
this form from the AFM website. Investment firms can be, upon request, allocated a
password-protected account by the AFM in order to access the AFM portal.

Immediately after receipt of the form by the AFM, you will receive a return copy of
the form submitted as confirmation, to the contact person’s e-mail address. This
copy will state the date and time of receipt. The AFM will then assess whether the
report justifies the initiation of an investigation as part of which the AFM may
request additional information from the investment firms concerned.


The ‘closed period’ refers to the period in which inside information will regularly
be available, such as the period in which the annual figures are prepared or a
period in which a takeover is being discussed.

In practice the insiders with a duty to notify are normally not permitted to
conduct or effect transactions in financial instruments of the issuer during this
period. it is also possible that an issuer indicates the periods in which these
persons are permitted to conduct or effect transactions in financial instruments
of the issuer (known as ‘open periods’). This also means that the objective of the
regulations is achieved, namely that no trading takes place in periods when
these persons have or could have access to inside information.

If either open or closed periods are used, the exact dates of the periods must be
established on an annual basis so that the periods are clearly defined.

5.3 Submission to the AFM?

The insider regulations do not have to be submitted to the AFM. This of course
does not mean that the preparation of such regulations is voluntary. The AFM
supervises the compliance with the prohibition of the use of inside information.
If the AFM wishes to review the regulations during an investigation into the use
of inside information, it will request the issuer to provide a copy.

25


Contents
1 Introduction

2. Prohibition of insider dealing

3 Exemptions to the prohibition of insider dealing
4 Notification regulations

5 Regulations for insiders

6 Insider lists

7 Enforcement by the AFM

8 Questions

19

24

26

28

29


When is delay permitted?

Situations can occur in which an issuer may decide to delay the publication of
inside information. This decision is for the issuer to make, and a decision to delay
is the issuer's own responsibility.

Three cumulative conditions apply to the possibility of delay:
1. the delay serves a legitimate interest of the issuer ; and
2. the delay is unlikely to mislead the public; and
3. the issuer can guarantee the confidentiality of the information.

If the company can no longer meet one of the above conditions, it must publish
the inside information concerned without delay. A decision to delay publication
does not have to be reported to the AFM. Whether the company was legally
entitled to delay publication may be retrospectively tested by the AFM.

Legitimate interest

First of all, a decision to delay must serve a legitimate interest of the company. A

legitimate interest could in any case involve:

¢ if making the information generally available could affect the result or
normal progress of negotiations to which the issuer is a party.
The decision not to disrupt negotiations in which the company is
involved can be considered to be a legitimate interest if publication of
the fact that negotiations are in progress could influence the outcome or
normal progress of these negotiations. This could for instance involve a
situation in which the financial viability of an issuer would be seriously
and imminently threatened.
In that case, the condition applying would be that publication of the fact
that negotiations are in progress and the identity of the parties involved
could have an unfavourable effect on the negotiations themselves. This
could seriously damage the interests of existing and potential
shareholders, since safeguarding the financial recovery of the issuer in
the long term could be threatened.
¢ if decisions taken by the management board of an issuer still have to be

approved by the supervisory board or similar body.
The condition that applies here is that making such decisions generally
known before this approval has been given could prevent investors from
properly assessing the situation. This mainly applies if, along with
disclosing the decision, it’s stated that the decision has not yet been
approved. If the other conditions permitting delay are also met, the
company is not (at this stage) obliged to make the information generally
available without delay. The inside information must be made generally
available without delay as soon as the decision is finalised.

The assessment of whether the issuer has a legitimate interest in delaying
publication must also involve a consideration of the interests involved. An
initially legitimate interest may no longer be legitimate in the light of certain


6 Accepted market practices

On the advice of the AFM, the Minister of Finance can exempt a specific practice that

strictly speaking could be described as market manipulation but which should be

permitted for good and sufficient reasons from the prohibition of market manipulation

(Section 4 of the Market Abuse Decree). Before a specific trading practice can be

exempted as an accepted market practice, it is tested in certain specific respects,

including:

¢ the level of transparency of the practice compared to that of the market as a whole;

¢ the need of the practice to protect the normal operation of the market;

¢ the degree to which the liquidity and efficiency of the market are affected by the
practice;

e the degree to which the practice affects the trading mechanism of the market and
the extent to which other market participants can respond to it timely and properly;

¢ the risk that the practice entails for the integrity of the market.

The AFM has a duty to continually advise the Minister of Finance regarding potential
accepted market practices. The establishment of accepted market practices is reserved
for each individual member state. Accepted market practices established in other EU
countries do not apply in the Netherlands and vice versa. In the testing of the above-
mentioned justification, the designation of a practice as an accepted market practice is
not automatically decisive. See also Section 4 and the related note in the Market Abuse
Decree implementing Article 2(2) of Commission Directive 2004/72/EC, which states:
“Member States shall ensure that practices, in particular new or emerging market
practices, are not assumed to be unacceptable by the competent authority simply
because they have not been previously accepted by it.”

In its assessment of market manipulation, the AFM will, however, take account of the
elements used to evaluate whether a market practice is acceptable as described above.
Any appeal for exemption on the grounds of justification will be rejected by the AFM if
the practice in question disrupts the market. A trading practice that is disruptive cannot
be considered to be ‘accepted’.


1 Introduction

This brochure is published by the Authority for the Financial Markets [Autoriteit
Financiéle Markten, or AFM] to provide further explanation of the rules applying to the
prohibition of market manipulation. These rules are based directly on the European
Market Abuse Directive (2003/6/EC). With the implementation of the Market Abuse
Directive as of 1 October 2005, the rules applying to the prohibition of market
manipulation were expanded in comparison to the previously existing regulations.

A single European internal market for financial services is crucially important for
economic growth and the creation of employment in the EU. Market integrity is a
necessary precondition for an integrated and efficient financial market. The efficient
operation of the markets for financial instruments and public confidence in those
markets are necessary conditions for economic growth and prosperity.

The prohibition of market manipulation is intended to promote the integrity of the
financial markets. This involves increasing and safeguarding the integrity of the market
and investor confidence, by promoting the provision of complete, correct and timely
information regarding financial instruments and the trading thereof in the financial
markets, so that market abuse is prevented. Trading, and the prices that are formed,
should be the result of legitimate supply and demand arising from investment decisions
taken on the basis of reliable and timely information.

In order to contribute to the creation of one integrated European financial market,
regulators in all member states must as far as possible apply the same terminology,
definitions and law enforcement. The AFM accordingly follows the guidance established
by CESR as closely as possible, and consults with foreign regulators in cases with cross-
border implications. The AFM does not permit market manipulation. The law gives the
AFM a wide range of powers (from the imposition of an order subject to a penalty for
non-compliance instructing an offender to cease conduct that breaches standards, to
the submission of a report to the Public Prosecution Service) that are deployed
depending on the seriousness of the offence. The AFM strives to provide further
clarification of the standards involved in the prohibition of market manipulation (or
elements thereof) in consultation with the market where possible and desirable. Strict
enforcement is applied in order to limit the number of cases of actual or attempted
market manipulation as far as possible.

This brochure deals with the prohibition of market manipulation and contains
references to relevant information.

Section 5.4 of the Financial Supervision Act [Wet op het financieel toezicht, or Wft],
entitled ‘Rules for the prevention of market abuse and for conduct in the markets for
financial instruments’ also contains obligations for listed companies to publish
insideinformation without delay, and prescribes additional obligations for parties
providing investment recommendations. These elements overlap the prohibition of
market manipulation, and are also dealt with in this brochure.


The Authority for the Financial Markets
T +31 (0)20 797 2000 F +31 (0)20 797 3800
Postbus 11723 | 1001 GS AMSTERDAM

www.afm.nt

The text in this brochure has been compiled with care and is informative in nature.
No rights can be derived from it. Decisions taken at national and international level
may mean that the text is no longer fully up-to-date when you read it. The AFM, the
Netherlands Authority for the Financial Markets, is not responsible or liable for any
consequences - such as losses incurred or lost profits - of any action taken in
connection with this brochure.

Amsterdam, April 2011


“AEM

Quick Guide to Inside Information



Contents

Introduction

Legal definitions

Inside information

When is delay permitted?

Way of making information generally available
Communication with third parties

Role of the AFM

Overlaps with other elements in the law

Further questions?

11
13
14
is

16


Annex F-4


Contents

10

11

12

13

Introduction

Legal basis

Scope and prohibitory provision

Examples

Justification for misleading signals and artificial price levels
Accepted market practices

Exemptions

Notification requirement for suspicious transactions
Signals

Enforcement

Enforcement Overlaps with other elements in the Wft
Additional notes on certain elements

Further questions?

10

11

12

13

14

15

16

17

19


1 Who is subject to the notification requirement?

The notification requirement only applies to an investment firm that reasonably
suspects that a transaction or an order to trade in relation to which the firm is
carrying out activities in or from the Netherlands, is in conflict with the prohibition of
the use of inside information or market manipulation. The requirement applies to
both licensed investment firms and investment firms that are exempt from the
licensing requirement.


so the obligation to make the information generally available without delay is
therefore applicable once again.

It could also be that the group of people aware of the inside information has
become so large that the issuer can no longer guarantee confidentiality. In this
case as well, the issuer must make the information generally available as soon as
possible in order to prevent trading with inside information.


Legal definitions

Regulated information (Section 1:1 Wft)

Information which an issuer or a person who seeks, without the issuer's consent,
the admission of its securities to trading on a regulated market makes generally
available pursuant to Section 5:25c to 5:25f, 5:25h or 5:25i.

Issuer (Section 5:25i (1) Wft)
Any legal person, company or institution:

a. which issued financial instruments or other instruments which are
admitted, with its consent, or for which admission has been requested,
with its consent, to trading in the Netherlands on:

1. aregulated market for which a licence as referred to in Section
5:26(1) was granted; or

2. a multilateral trading facility for which a licence as referred to in
Section 2:96 was granted; or

b. at whose proposal a purchase contract has been established in respect
of a financial instrument, not being a security, which was admitted ona
regulated market as referred under (a)(1), or a multilateral trading
facility as referred to under (a)(2), or for which admission was
requested.

Obligation to make information generally available (Section 5:25i(2) Wft)

An issuer shall, without delay, make information as referred to in the definition
of inside information in Section 5:53(1) which directly pertains to itself generally
available.

Inside information (Section 5:53(1))

Inside information is defined as awareness of specific information that relates
directly or indirectly to an issuer as referred to in Subsection (4)(a) to which the
financial instruments pertain, or to the trade in those financial instruments,
which information has not been publicly disclosed and whose disclosure might
have a significant influence on the price of the financial instruments or on the
price of derivative financial instruments.

Delay in making inside information generally available (Section 5:25i(3))
The issuer or management company may delay the general availability of the
information if:

a. the delay serves a legitimate interest of the issuer ; and

b. the delay is unlikely to deceive the public; and

c. the issuer can guarantee the confidentiality of this information.

This option of delay is elaborated further in Article 4 BT.


10 Enforcement

Market manipulation is a crime. Not only can other investors suffer direct financial
losses as a result of market manipulation, ultimately all citizens can be indirectly
affected through their investments in insurances or pension funds. The legislator has
therefore prohibited market manipulation by any party. In cases of market
manipulation, the AFM can impose a duty backed by an astreinte or can impose a
penalty. Serious cases will be referred to the Public Prosecution Service [Openbaar
Ministerie] through an official report. Infringement of the prohibition of market
manipulation is an economic offence.

Influential investors, major shareholders and professional market participants are in
particular expected to set an example. Due to their size and specific roles in the market,
they play an important part in the creation of a transparent and legitimate market.


that this is the case. A change to a scheme does not have to mean that there is a
lack of consistency if it is made with the intention of continuing to apply the
change in future years, since a new element of consistency is thus introduced to
the scheme.

The timing of the allocation of a financial instrument must be a fixed and
objectively determinable date, if possible a fixed date on which allocations are
made. This prevents a situation in which the one-off allocation of financial
instruments for a particular situation or frequent changes in the beneficiary
group, the degree of participation and the conditions used could still be exempt
from the prohibition. It is not necessary to inform the AFM of a proposed
allocation. The AFM may, in the context of an investigation, request information
from the issuer and check the extent to which the issuer can demonstrate the
dates upon which decisions to establish an employee benefit scheme were
taken and whether the scheme follows a consistent course of action as regards
the conditions and periodicity of allocation.

For the sake of clarity, it should be added that financial instruments may be
allocated to, for instance, employees entering service, or managing and
supervisory directors on their appointment, or to employees or managing or
supervisory directors in the event they attain an anniversary or are promoted,
subject to the condition that the employee benefit scheme explicitly states that
financial instruments can be allocated in these situations. This means that the
employee benefit scheme is sufficiently consistent.

If the employee benefit scheme meets the requirement of a consistent course of
action, then there is no conflict with the prohibition, despite the possibility that
inside information may be available at the time of allocation.

Exercise of rights in the context of an employee benefit scheme (Section 2(b) of
the Market Abuse (Financial Supervision Act) Decree)

The exercise of options, exchange of convertible bonds or exercise of warrants or
similar rights to shares or depositary receipts for shares granted under an
employee benefit scheme on the expiration date or within a period of five
business days prior to this date are exempt from the prohibition of the use of
inside information. This also applies to the sale of the shares or depositary
receipts for shares acquired as a result of the exercise of these rights within this
period, subject to the condition that - at least four months prior to the
expiration date - the beneficiary notifies the issuer in writing of their intention
to sell, or has given the issuer an irrevocable power of attorney to sell.


The Authority for the Financial Markets
T +31(0)20 797 2000 | F +31(0)20 797 3800
Postbus 11723 | 1001 GS AMSTERDAM

www.afm.nl

The text in this brochure has been compiled with care and is informative in
nature. No rights may be derived from it. Decisions taken at national and
international level may mean that the text is no longer fully up-to-date when you
read it. The AFM, the Netherlands Authority for the Financial Markets, is not
responsible or liable for any consequences - such as losses incurred or lost
profits - resulting from any action taken pursuant to information in this
brochure.

Amsterdam, April 2011


Institutional brochure

What is the legal definition of inside information? How should this information be made generally
available and how to do this properly? What can market participants expect from the AFM? These and
other questions are answered in this "Quick Guide to inside Information". This is not formal guidance,
but a practical summary published by the AFM as a supplement to its explanatory brochure "Inside
information". The goal of this Quick Guide is to present a quick and convenient overview of the most
important aspects of the obligations in relation to inside information and how to deal with these issues
in practice.


5 What should be reported?

A report of a reasonable suspicion submitted by an investment firm should include

the following information:

¢ — adescription of the transaction or order to trade, the type of order and the type
of trading platform;

¢ the reasons for suspicion that the transactions might constitute insider dealing
or market manipulation;

¢ the means for identification of the persons on behalf of whom the transaction
has been carried out, and of other persons involved in the relevant transaction.
Information should also be provided, if possible, showing whether the person
issuing the order did so for their own account or for the account of a third party;

¢ the capacity in which the investment firm acted in the matter;

¢ any information which may have significance in reviewing the suspicious
transaction by the AFM (such as, for example, recordings of conversations
between a broker and the client).

If this information is not (immediately) available at the time of notification, the
notification shall include at least the reasons why the notifying persons suspect that
the transactions might constitute insider dealing or market manipulation (see the
second bullet point above).

The AFM also requests those subject to the notification requirement to report cases
requiring immediate attention to the AFM as soon as possible, even in the event that
all necessary information is not yet available. All remaining information shall be
provided as soon as it becomes available. The AFM will take all possible measures to
ensure that the identity of the person making the notification will not be released to
anyone if this would or could cause damage to this person.


2__ Prohibition of insider dealing

2.1 Legal definition
It is generally prohibited to conduct or effect a transaction in financial
instruments with the use of inside information in or from the Netherlands.

What is meant by inside information?

Inside information is “awareness of specific information that relates directly or
indirectly to an issuer to which the financial instruments pertain or to the trade
in those financial instruments that has not been publicly disclosed and which if
disclosed could have a significant influence on the price of the financial
instruments or on the price of financial instruments derived therefrom”. (Section
5:53(1) Wft first sentence).

Specific information’
Specific information is defined as information relating to
+ asituation that exists or which may reasonably be expected to exist in
future; or
+ an event that has occurred or which may reasonably be expected to
occur; and
that is specific enough to reach a conclusion regarding the possible effect of the
situation or event on the price of financial instruments or financial instruments
derived therefrom.

Significant’
This concerns information that is meaningful. In other words, information which
a reasonable investor would be likely to use as part of the basis of his
investment decisions. The term ‘significant’ here does not therefore refer to its
meaning in the context of statistics (as in “statistically significant”). It is defined
as “meaningful”.

‘Making use of’
A person conducting or effecting a transaction is making use of inside
information if he is aware or should be aware of the fact that there is
information not available to the public that could have a significant effect on
the price of financial instruments or financial instruments derived from those
financial instruments. The basic principle is that the element of ‘making use of’
can be explained by the evidence of ‘awareness’. This does not mean there must
be a causal link. tt does not have to be shown that the transaction is the result
of the inside information concerned.


Allocation of financial instruments in the context of an employee benefit
scheme (Section 2(a) of the Market Abuse (Dutch Financial Supervision

Act) Decree

An exemption applies to the allocation of financial instruments to directors,
supervisory directors or employees in the context of an employee benefit
scheme, if a consistent course of action is followed with regard to the conditions
and periodicity of the scheme. For the purpose of this article, an employee
benefit scheme is defined as ‘a scheme whereby certain financial instruments
are offered to directors, supervisory directors or employees’. The issuer or its
subsidiary or group company must follow a consistent course of action with
regard to the conditions and the periodicity of the scheme. The main issues
concerned include the time of allocation, the decision to allocate, the group of
beneficiaries to which financial instruments are allocated and the number of
financial instruments that are allocated.

These above-stated elements of the allocation must be in accordance with the
procedure followed in preceding years. The allocation (this includes the
combination of offer and acceptance, in other words, the entire agreement) of
options, convertible bonds, warrants and similar rights to shares in an issuer in
the context of an employee benefit scheme are exempt from the prohibition of
making use of inside information. Share (participation) plans also fall under this
exemption, since the definition states “the allocation of financial instruments”.
These plans are regularly employed as a compensation instrument in order to
create a long-term commitment to the institution or subsidiary or group
company from its directors, supervisory directors or employees.

It is possible that at the time the agreement is concluded - the allocation - the

issuer concerned or the directors, supervisory directors or employees may be in

Possession of inside information, so that without this exemption they would be
acting in breach of the prohibition.

The purpose of using a consistent course of action is to establish a strict
framework for the allocation of financial instruments to directors, supervisory
directors and employees, so that on the basis of actual circumstances it can be
demonstrated that any inside information that was available at the time of
allocation could not have played a role in the allocation.

The existence of a consistent course of action must be properly established by
the company concerned. For instance, it must be able to demonstrate when the
(annual) decision to allocate is made. The issuer is itself responsible for ensuring
that if it introduces a new employee benefit scheme or changes the conditions
of an existing scheme, that the decision to do so is taken during a period in
which no use is made of inside information. It must also be able to demonstrate


Commodity derivatives

The definition of inside information in the case of commodity derivatives differs
from the common definition described above. With regard to financial
instruments for which the value is partly determined by the value of
commodities, inside information is defined as: “awareness of non-disclosed
specific information that relates directly or indirectly to one or more commodity
derivatives, which investors in those commodity derivatives may expect to be
Publicly disclosed in accordance with market practices that are customary in the
regulated market, or the market for financial instruments that is not a regulated
market for which the holder is recognised as referred to in Section 5:26(1), in
which those commodity derivatives are traded.” (Section 5:53 (1) Wft second
sentence). Information which investors may expect to be publicly disclosed shall
be involved if this information is of such a nature that it: i) is routinely made
available to the investors in those financial instruments; or ii) must be publicly
disclosed in accordance with the statutory regulations applicable in the market
or in accordance with the market rules, contracts or customary practices in that
market. (Section 5:56(4) Wft).

2.2 Scope of the prohibition

According to Section 5:56 Wft, it is forbidden to make use of inside information

by conducting or effecting a transaction:

a. in or from the Netherlands or a non-Member State in financial instruments
admitted to trading on a regulated market which has been licensed in
accordance with Section 5:26(1) or a multilateral trading facility for which
the investment firm holds a licence as referred to in Section 2:96, or for
which the admission to such trading has been requested;

b. in or from the Netherlands in financial instruments admitted to trading on a
regulated market or multilateral trading facility in another Member State or
admitted to trading on a system comparable with a regulated market or
multilateral trading facility in a non-Member State, or in financial
instruments for which the admission to such trading has been requested; or

c. in or from the Netherlands or a non-Member State in financial instruments
other than financial instruments as referred to under a) or b), whose value
partly depends on the financial instruments referred to under a) or b);

d. in or from another Member State in financial instruments admitted to
trading on a multilateral trading facility for which the investment firm holds
a licence as referred to in Section 2:96.


Objectives of the legislation

For situations in which the above does not provide sufficient clarification, an understanding of the
objectives and rationale of the legislation is useful. Some of the main considerations are therefore
described below.

Prompt and fair disclosure of information enhances market integrity, whereas selective disclosure by
issuers can lead to a loss of investor confidence in the integrity of the financial markets.

Efficient, transparent and integrated securities markets contribute to the creation of a true internal market
in the European Community and benefit growth and the creation of employment through better capital
allocation and reduced costs. The publication of accurate, comprehensive and timely information with
regard to issuers creates sustainable investor confidence and makes it possible to form a well-founded
opinion regarding the results and the assets of these issuers. This benefits both investor protection and
market efficiency. To this end, issuers must guarantee that adequate transparency is provided to investors
through a steady flow of information.

Modern communication methods make it possible for financial market professionals and private investors
to have more equal access to financial information, but also increase the risk of the spread of false or
misleading information. To protect investors, issuers must publish inside information not only timely, but
also as quickly and as simultaneously as possible to all categories of investors in all member states in which
the issuer has requested or approved its admission.

The permanent provision of information to holders of securities admitted to trading in a regulated market
must at all times be based on the principle of equal treatment.

What can one expect from the AFM?

The AFM will insofar as possible respond to all queries regarding the obligation to make inside information
generally available and how to deal with it in practice. The AFM acts in the interests of transparency and
equality of information in the market for all market participants and will take action as soon as these
interests are threatened.

The AFM reads press releases, listens in on conference calls and monitors capital market trading.

The AFM contacts an issuer as soon as there is confusion or unclarity in the market in relation to the issuer.
The AFM can suspend trading if there is a damaging or unlawful inequality of information (or
misleading/false information) in the market.

The AFM will not normally suspend trading during a shareholders’ meeting or at the request of an
institution.

Further questions?

The Securities Markets and Financial Infrastructure Supervision Division [afdeling Toezicht Effectenmarkten
en Financiéle Infrastructuur, or TEFI] of the AFM is the contact point for questions relating to the necessity
and timing of publication of inside information and other queries regarding market abuse. In addition to this
brochure, advice will be provided regarding good practices on a regular basis.

Further information can be found at www.afm.n/ under ‘Professionals’ > Market Abuse’.

For questions and advice, you can send an e-mail to marketsupervision@afm.nl or contact the TEFI
Department by telephone on +31 (0)20 797 37 77.

Please note that telephone conversations with the TEFI department may be recorded for supervisory
purposes.


developments. The company must continuously assess whether its decision to
delay publication is still based on a legitimate interest.

Unlikely to mislead

The second condition is that the delay is ‘unlikely to mislead the public’.
Misleading may be involved if the company withholds information with the
intention of giving a false impression of the situation. Or, if the company
reasonably could or should have known that withholding the information would
give a false impression of the situation (by providing information in its other
communications that does not correspond to the information for which
publication has been delayed).

When delaying publication, the issuer must continually consider whether
withholding the information is likely to mislead the public and whether this is
justified in view of all the circumstances involved. In this respect it must also
consider its relevant communications issued and actions taken prior to the
existence of the inside information.

Guarantee of confidentiality
The third condition for delay concerns the ability to guarantee the confidentiality
of the inside information. This guarantee has two elements:
¢ The issuer controls access to inside information and takes adequate
measures so that access is limited to persons who need to know this
information as part of the normal exercise of their work, profession or
responsibilities; and
¢ The issuer moreover takes measures so that it is possible to make the
inside information generally available without delay as soon as the
confidentiality of the information can clearly no longer be guaranteed.
The AFM recommends that a fast-track scenario is prepared stating the steps to
be taken and the persons involved (and their back-ups). There should also be a
list of projects which could involve inside information and the persons who are
involved in these projects. The AFM’s advice to companies is to continually
emphasise confidentiality at every opportunity.

Having a good procedure can ensure that the time between any leak of the
information and making a press release generally available is kept to a minimum.
Any potential ‘information inequality’ in the market can thus be kept as limited
as possible.

The AFM’s advice in this respect is to put proper internal AO/IC procedures in
place in order to deal with the obligation to make inside information generally
available.

Of course the issuer is obliged to make inside information available without
delay as soon as confidentiality can clearly no longer be guaranteed, for instance
if there has been a leak of this information. As soon as confidentiality can clearly
no longer be guaranteed, the measures that the company has taken to ensure
confidentiality are no longer relevant. The measures clearly were not adequate,


“AFM

Insider dealing



The Authority for the Financial Markets

The AFM promotes fairness and transparency within financial markets. We are
the independent supervisory authority for the savings, lending, investment and
insurance markets. The AFM promotes the conscientious provision of financial
services to consumers and supervises the honest and efficient operation of the
capital markets. Our aim is to improve consumers’ and the business sector's
confidence in the financial markets, both in the Netherlands and abroad. In
performing this task the AFM contributes to the prosperity and economic
reputation of the Netherlands.

The AFM operates in two areas:

Financial services

The AFM promotes due care in the provision of financial services to consumers.
Businesses and persons who provide financial services must be experts in their
field, reliable and ethical. The information provided by financial undertakings
and pension providers shall be accurate, clear and not misleading. Companies
must act in the interests of their clients; a duty of care rests on them.

Capital markets

The AFM promotes the fair and efficient operation of the capital markets, on
which investors can rely. We enforce the rules for participants in the markets
for equities and other securities. Market abuse — use of inside information,
market manipulation or misrepresentation — is forbidden. Listed companies
must publish inside information correctly and in a timely manner. We enforce
the rules for the issuance of securities and public takeover bids, for financial
reporting and for auditors responsible for auditing this reporting.


5 Regulations forinsiders

5.1 The obligation

An issuer domiciled in the Netherlands that has issued or intends to issue
financial instruments as described in Section 5:56(1)(a) or (b) Wft or an issuer
domiciled in another Member State that has issued or intends to issue financial
instruments as described in Section 5:56 (1)(d) Wft or an issuer domiciled in a
non-Member State that has issued or intends to issue financial instruments as
described in Section 5:56(1)(a) Wft shall prepare regulations relating to the
ownership of, and transactions in, its shares or in financial instruments whose
value is partly determined by the value of these shares by its employees,
directors and supervisory directors (the ‘insider regulations’) (Section 5:65 Wft).

The regulations comply with rules established by an order in council (Section 11
of the Market Abuse (Financial Supervision Act) Decree). An issuer that has
issued or will issue financial instruments in the context of monetary policy,
foreign-exchange policy or the management of public debt is exempt.

5.2 Content of the regulations

A model version of insider regulations is available for download from the

website of the AFM. The insider regulations contain rules for:

a the duties and authorisations of the person designated by the issuer to
provide notifications under the notification regulations, if the issuer has
designated such a person (usually the Compliance Officer). If an issuer has
designated a Compliance Officer, rules must be established for his duties and
authorisations. The persons with a duty to notify on the basis of the
notification regulations however remain personally responsible for the
accuracy and promptness of the notification to the AFM. The appointment of
a Compliance Officer does not affect this responsibility.

b the obligations of employees, directors and supervisory directors in relation
to the ownership of, and transactions in, financial instruments relating to
the issuer;

cif applicable: the period in which a person with a duty to notify may not
conduct or effect transactions in financial instruments relating to the issuer.
Additionally, ‘closed periods’ (periods in which certain persons within an
issuer are prohibited from conducting transactions) must also be included in
the regulations

24


3 Exemptions to the prohibition of
insider dealing __

There are a number of exemptions to the prohibition of insider dealing.
Transactions whereby one of the parties may be or is in possession of
information but which by nature do not form a threat to the integrity of the
capital market or the interests of the parties operating in that market, are not
considered to constitute insider dealing. These exemptions are specified in
Sections 5:56(5) and (6) Wft, in Section 2 of the Market Abuse (Financial
Supervision Act) Decree and the European Commission Regulation 2273/2003
regarding exemption rules for buy-back programmes and stabilisation of
financial instruments.

The following transactions are exempt from the prohibition:

Compliance with an enforceable obligation (Section 5:56(5)(a) Wft)

The conducting or effecting of transactions in financial instruments to comply
with an enforceable obligation that already existed at the time when the party
conducting or effecting the transaction became aware of inside information

is exempt.

In the context of monetary policy, foreign-exchange policy or the management
of public debt (Section 5:56(5)(b) Wft)

Stabilisation and buy-back of financial instruments (Section 5:56(s)(c) and (d)
Transactions in the context of a buy-back programme or in the context of the
stabilisation of financial instruments are exempt, as long as this occurs in
accordance with the established measures, including those relating to
transparency. Further details are given in the European Commission Regulation
2273/2003, which states the objectives and conditions with which buy-back
programmes and the stabilisation of financial instruments must comply in order
to qualify for the exemptions. If these objectives and conditions are not
complied with, the exemption shall not apply. This EC Regulation is
implemented in Section 5:56(s)(c) and (d) Wft and is directly applicable with
respect to the objectives and conditions.


AFM

The Notification Requirement (reasonable suspicion of market abuse)



- Influencing the closing price of a financial instrument so that the price of this financial instrument
serves as the reference price for a different order matching system, with the intention of influencing the
price at which orders on this order matching system are settled.

Placing orders with no intention of executing them

¢ The entry of an order or orders with a higher or lower price than the previous order with no intention
of execution. The purpose of the orders is to give a misleading impression of demand for or supply
of the specific financial instrument. The orders are subsequently cancelled before they are
executed.

Example:

During the order entry phase preceding the closing/opening price rotation, (large, limited) sell orders
are entered with a lower limit than the last (theoretical) price. This has a substantial effect on the
theoretical auction price and the associated volume. The intention of the market participant is to
encourage the entry of contrary orders. The initiating market participant cancels (a part of) its sell
orders immediately prior to the auction or execution of the order(s). These cancelled orders are often
preceded by orders entered by the market participant in question at more favourable prices that — as a
result of the order cancellation — take precedence in the order book, and are thus executed at
favourable prices.

Painting the tape
¢ This involves engaging in a transaction or series of transactions which are shown on a public display
facility in order to give the impression of activity or price movement in a financial instrument.

Example:

The entry of orders and execution of transactions by a market participant or in collaboration with others
without change of beneficial ownership or market risk in order to give third parties the impression that
there is interest in the security in question, and to encourage these third parties to execute transactions
in this security on this basis.

Trading on one market to improperly position the price of a financial instrument on a related market

¢ This practice involves trading in financial instruments in one market with a view to improperly
influencing the price of the same or a related financial instrument in another market. This involves
influencing the price of correlated financial instruments.

Examples:

- Influencing the price of an underlying security in order to be able to meet margin requirements on
one’s own position in a derivative instrument.

- Influencing the price of a financial instrument in order to profit from stop-loss orders in derivative
instruments.

Collusion / Acting in concert:
* Collusion between two or more parties to give the impression of market activity or to artificially
influence supply or demand.

Example:
Collusion between two market participants involved in a public offer for shares of a listed company
whereby one party places a relatively large buy order above the price of the public offer and the other


unusual changes in the volume of orders and shares prices before public
announcements regarding the financial instruments in question.

¢ Employees’ own account transactions and related orders timed just before clients’
transactions and related orders in the same financial instrument.

Examples of potential market manipulation and/or trading with inside information

¢  Aunusual concentration of transactions in a particular financial instrument (for
example, with one or more institutional investors known to be affiliated with
issuer or a party with a particular interest in the issuer such as a (potential)
bidder.

¢  Anunusual repetition of a transaction among a small number of clients over a
certain time period.

¢ An unusual concentration of transactions and/or orders with only one client; or
with the different securities accounts of one client; or with a limited number of
clients (especially if the clients are related to one another).

The above-mentioned examples are intended as a guide only, not as a checklist for
investment firms. Investment firms are expected to make a separate assessment,
based on their professional judgement, in each case of a possibly suspicious
transaction, in order to determine whether grounds for reasonable suspicion exist
that must be reported to the AFM.


exemption have not been met and the prohibition of making use of inside
information applies to both (major) shareholders and potential (major)
shareholders.

Dividend distribution (Section 2(f) of the Market Abuse (Financial Supervision
Act) Decree)

The acquisition of shares or depositary receipts for shares issued due to
distribution of a dividend or dividend distribution other than in the form of a
dividend with stock option is exempt from the prohibition of the use of inside
information.

Although those entitled to the dividend or the issuer may possess inside
information at the time the dividend is distributed, it does not make sense to
make this distribution subject to the prohibition. The amount of the dividend
and the manner of its distribution will have already been approved by resolution
of the general meeting of shareholders and apart from the possibility of a stock
option, are more or less completely separate from the influence of individuals
entitled to the dividend.

The exemption for the acquisition of shares or depositary receipts for shares is
not intended for the acquisition of shares or depositary receipts for shares as a
result of the decision to take a dividend in the form of shares or depositary
receipts for shares by the person entitled to dividend in the event of a stock
option. Only the acquisition of shares or depositary receipts for shares in the
form of optional dividend is not permitted, however the issuance thereof is
permitted.

Intermediaries (Section 2(g) of the Market Abuse (Financial Supervision

Act) Decree)

An intermediary acting in accordance with the rules of good faith in the service
of his clients and thereby coming into possession of inside information is
exempt from the prohibition of the use of inside information. This concerns
persons (brokers) acting on the instructions of and for the account of third
parties. Trading by such persons for their own account is not exempt from the
prohibition.

Given the scope of Section 5:56 Wft, the exemption also applies to
intermediaries trading in financial instruments not admitted for trading ina
regulated market but traded in another market for financial instruments.
Intermediaries are also not committing an offence when executing orders for
clients as part of their professional trading activities.


The legal obligation

An issuer has to make inside information generally available without delay.

Why?

A transparent market in which companies provide complete, accurate and timely information to
investors is a market in which its participants have the greatest confidence. This minimises risk, and
contributes to keeping the cost of capital as low as possible. This is in the interests of both businesses
and the investing public. Moreover, publication without delay ensures that trading on the basis of inside
information is prevented as much as possible.

What is ‘inside information’?

¢ Information that could have a significant influence on the price of financial instruments: Information
that a reasonable investor would be likely to use as part of the basis of his investment decisions.

¢ Information that is specific and relates directly to the issuer:
A decision, event or development that occurs, has occurred or which can be expected to occur that
will (probably) affect the issuer's future development.

¢ Information that has not yet been made public:
The information cannot or not easily be found by the investing public.

What is meant by ‘to make generally available’?

There is only one permitted way to make information generally available. Publication has to take place
by means of a press release in a non-discriminatory manner. Simultaneously, the press release must also
be published on the company’s own website and a copy must be sent to the AFM.

What is meant by ‘without delay’?
As soon as possible.

What requirements must the press release meet?
The press release must contain complete and unadjusted information so that investors are able to form
an accurate and timely assessment. It should be published in Dutch or English, or both.

When can publication be delayed?

Delay is only permitted if three conditions are met:

¢ the delay serves a legitimate interest of the issuer; and

¢ the delay will not lead to the public being misled; and

¢ the issuer can guarantee the confidentiality of the information.

Please note: the right to delay publication lapses if one of these three conditions is no longer met. In this
case the information must be made generally available without delay.

What a company should avoid:

* Delaying publication solely because full clarification is not yet possible;

¢ Distributing a press release in which results or expectations are not immediately recognisable. Do not
present a riddle or a puzzle;


Contents

1 Who is subject to the notification requirement?

2 What is a reasonable suspicion?

3 Examples

4 Where to should notification reports be submitted?

5 What should be reported?

6 implementation of the notification requirement

7 Liability and duty of confidentiality

8 How the AFM supervises the notification requirement

9 Further questions?

10

11

12

14

15

16


Overlaps with other elements in the law

Market manipulation

Negligence with regard to the obligation to publish inside information could lead
to a confluence with the prohibition of market manipulation. Withholding
relevant facts in a press release published by an issuer may also constitute
market manipulation as defined in Section 5:58(1d) Wft: “to disseminate
information that sends or may send an incorrect or misleading signal with regard
to the supply of, demand for or the price of financial instruments, while the
party disseminating the information knows or should reasonably suspect that
that information is incorrect or misleading”. For further information, please refer
to www.afm.nl and the brochure ‘Market Manipulation’.

Misuse of inside information

If natural or legal persons make use of inside information when executing or
effecting a transaction in financial instruments, this might fall under the
prohibition of the use of inside information. Inside information may not be
shared with a third party, other than in the normal exercise of one’s work,
profession or duties.

For further information, please refer to www.afm.nl and the brochure ‘Inside
Information’.

Rules for insiders

The Wft also contains obligations for the maintenance of insider lists and rules
for insiders, and the reporting of insider transactions.

For further information, please refer to www.afm.nl and the brochure ‘Inside
Information’.

Public bids for securities

Anyone making a public takeover bid (the bidder) and the company which is the
target of a bid (the target company) must comply with the rules in Part 5.5 Wft
and the Public Takeover Bids Decree [Bes/uit openbare biedingen Wft, or “Bob”.
The rules state, among other things, that the bidder and the target company
must issue public announcements at certain fixed times. Moreover, throughout
the bidding process the bidder and the target company are subject to the
obligation to publish inside information without delay pursuant to section
5:25i(2) Wft. Pursuant to article 4(3) Bob, a bidder that is not listed in the
Netherlands is also subject to the obligation to publish inside information
without delay.

Certain public announcements related to a public takeover bid are excluded
from the option of delay in Section 5:25i(3) Wft because there is no legitimate
interest to delay making the information generally available (see article 4(4)
Bob). This information must be published without delay in all cases.

For full details of the obligations applying to public takeover bids, please refer to
the bidding rules.


7 Exemptions

There are two practices that are explicitly exempt from the prohibition of market
manipulation. In such cases, however, specific conditions must be met.
These concern:
i. the repurchase of own shares as part of a buy-back programme, and
ii. stabilisation of the price of a financial instrument immediately after an initial
public offering.

These two practices are subject to special obligations with regard to publication. The
transactions themselves must also satisfy a number of conditions. These conditions are
specified in Commission Regulation 2273/2003 and relate to obligations with regard to
publication, reporting requirements and limitative conditions in relation to price and the
period in which the trading occurs. The AFM’s preferred option for publication pursuant
to the Commission Regulation is the manner specified for the publication of press
releases in Section 5:25i(1) Wft.


Disclosing new inside information during presentations, interviews etc.;
Allowing the interests of shareholders to take precedence over those of the investing public at large;
Referring in a press release to another location where (additional) inside information can be found;

¢ Referring in a press release to relevant information from previous press releases without
including this information in the current press release;

* Including inside information in a prospectus;

¢ Publishing only parts of a coherent complex of facts;

* Delaying publication solely to protect the reputation of the company or of its directors;

¢ Sending inside information exclusively to regulators’ register(s);

¢ Hiding bad news or burying it in a mass of information;

* Publishing only the consequences of issues or the restorative measures taken without stating the
reason or cause;

¢ Waiting until the next regular reporting date before making inside information generally available;

¢ Inthe event of bad news, waiting until the situation or event has been dealt with;

© Protecting investors assuming their ignorance or lack of knowledge;

¢ Thinking that investors do not want to be overwhelmed with press releases.

What an issuer should do:

¢ Provide a clear header and summary that is appropriate for the full content and message of the

press release;

Either state its expectations clearly and unambiguously, or avoid such statements completely;

Publish both good and bad news as quickly as possible;

¢ Publish deviations from previously announced expectations or targets without delay;

Focus on the investing public as a whole: private investors are just as important as analysts and

institutional investors;

© Ifin doubt, publish!

Preferably use generally accepted concepts of profit;

If concepts of profit are used that are not generally accepted, provide a clear indication and

explanation thereof;

Consider issuing a press release in the event of an unfounded rumour in the market if the issuer’s

reaction could have a significant effect on price or volume movements;

Issue a press release if a director is incorrectly quoted with regard to inside information;

* Check a prospectus before publication for inside information, and if it contains such information,
publish a press release;

Issue a press release if inside information is unintentionally released during an interview or

presentation;

Strive to release news before or after market opening hours (without breaching the requirement

to publish without delay).

.


Introduction

In this brochure the AFM explains the regulation applying to the obligation for an
issuer to make generally available, in other words publish, inside information
without delay. An issuer is a company that has issued financial instruments - for
example shares - that are traded on a regulated market or multilateral trading
facility (MTF) in the Netherlands. This regulation is based directly on the
European Market Abuse Directive and is, in the Netherlands, included in Section
5:25i(2) of the Financial Supervision Act [Wet Financieel Toezicht, or Wft] and in
articles 4 and 5 of the Decree on Implementation of the Transparency Directive
for issuers in the Wft [Bes/uit uitvoeringsrichtlijn transparantie uitgevende
instellingen Wft, or BT].

Before the implementation of the Transparency Directive in the Wft, the
obligation was stated in Section 5:59(1) Wft (revoked). With the implementation
of the directive, the obligation was moved to the new Part 5.1.a, which contains
the rules applying to the provision of information by issuers.

The obligation has not changed. Moreover, the new wording ‘to make generally
available’ does not differ in meaning from the previously used wording ‘to make
public’.

This brochure provides practical guidance for those willing to know how
information has to be made generally available. It is intended to provide a
general picture of the rules applying to making inside information generally
available without delay. The brochure also refers to relevant (legal) documents
and other sources of information.

No rights can be derived from this brochure. You should not take action solely on
the basis of this brochure. If the text in the brochure differs from the text of the
Wft and the notes thereto, the BT, or the Market Abuse Decree [Besluit
Marktmisbruik Wft], the text of the Wft and decrees shall prevail. The actual text
of the European Market Abuse Directive, the Wft, the BT and the Market Abuse
Decree can be found at the AFM’s website: www.afm.n! at the 'Market Abuse’
section.


4 Examples

The European Market Abuse Directive and the note to Section 5:58 Wft state certain
specific examples of practices that qualify as market manipulation. In addition, the
collective body of European regulators CESR has compiled a list of practices that, under
certain conditions and circumstances, can be considered by the European regulators to
constitute market manipulation. The list is not exhaustive. The following examples are
quoted from the above-mentioned (and other) sources.

Examples of potential market manipulation

a) Transactions or orders giving a false or misleading signal:

¢ Entering into arrangements for the sale or purchase of financial instruments where
there is no change in beneficial interests or market risk, or where the transfer of
beneficial interest or market risk is only between parties who are acting in concert
or collusion (other than repo transactions and securities lending).

¢ After institutions have been allocated financial instruments in the primary offering,
they purchase these instruments in the secondary market in order to push up the
price, and, in so doing, to be able to sell the financial instruments obtained in the
primary offering and in the secondary market at a higher price.

¢ The purchase or sale of financial instruments at the close of the market in order to
affect the closing price of the financial instrument concerned.

¢ The entry of an order or orders with a higher or lower price than the previous order
with no intention of execution. The purpose of the orders is to give a misleading
impression of demand for or supply of the specific financial instrument. The orders
are subsequently cancelled before they are executed.

¢ Pretending there is market activity by conducting transactions shown on a public
trading facility, in order to give the impression of activity or price movement in a
financial instrument.

b) Transactions or orders designed to bring or maintain a price to an artificial level:

¢ Large-scale buying or selling of a financial instrument on the expiration date of a
related derivative, or vice versa.

¢ Large-scale buying or selling of a financial instrument on the date when an index is
reweighted while already holding a short or long position, in order to profit from the
reweighting or change in composition of an index.

¢ Large-scale buying or selling of a financial instrument at the end of a month, quarter
or other reporting period, in order to improve the performance of a portfolio or
financial instrument.

¢ Taking actions to achieve an artificial price level at which other market participants
are forced to make delivery, accept delivery or request deferral of delivery in order
to meet their obligations in relation to a financial instrument. Such actions are taken
by a market participant with a position in a financial instrument and thus having a
significant influence on the supply of, demand for, or delivery conditions for that
financial instrument or a derivative of that financial instrument.

¢ Trading in financial instruments in a market with a view to improperly influencing the
price of the same or a related financial instrument in another market. This involves
influencing the price of correlated financial instruments.


The Authority for the Financial Markets

The AFM promotes fairness and transparency within financial markets. We are the independent
supervisory authority for the savings, lending, investment and insurance markets. The AFM promotes
the conscientious provision of financial services to consumers and supervises the honest and efficient
operation of the capital markets. Our aim is to improve consumers’ and the business sector's
confidence in the financial markets, both in the Netherlands and abroad. In performing this task the
AFM contributes to the prosperity and economic reputation of the Netherlands.

The AFM operates in two areas:

Financial services

The AFM promotes due care in the provision of financial services to consumers. Businesses and persons
who provide financial services must be experts in their field, reliable and ethical. The information
provided by financial undertakings and pension providers shall be accurate, clear and not misleading.
Companies must act in the interests of their clients; a duty of care rests on them.

Capital markets

The AFM promotes the fair and efficient operation of the capital markets, on which investors can rely.
We enforce the rules for participants in the markets for equities and other securities. Market abuse —
use of inside information, market manipulation or misrepresentation — is forbidden. Listed companies
must publish inside information correctly and in a timely manner. We enforce the rules for the
issuance of securities and public takeover bids, for financial reporting and for auditors responsible for
auditing this reporting.


Communication with third parties

Obviously it can happen that an issuer passes on information that has not yet
been published to third parties, such as analysts, journalists, investors,
financiers, credit rating agencies and employees. As long as this does not
concern inside information, this is permitted. If inside information is involved,
the company must meet the following conditions:

e If the issuer or a representative thereof intentionally shares inside
information with a third party as part of the normal exercise of their
work, profession or duties, the information must simultaneously be
made generally available by means of a press release.

¢ If the information is shared with a third party unintentionally, the issuer
must make it generally available immediately thereafter.

This does not apply if the person with whom the information is shared is subject
to a duty of confidentiality. This duty of confidentiality may be either legal or
contractual. If for example an issuer consults a lawyer or civil-law notary, this
person is bound by his statutory duty of confidentiality. In this case, inside
information can be shared if this is necessary in order to protect the interests of
the company. Obviously, the civil-law notary or lawyer may not trade in the
financial instruments of the issuer from that moment onwards.


Stabilisation and buy-back of financial instruments (Section 2(i) of the Market
Abuse (Financial Supervision Act) Decree)

The exemption rules for buy-back programmes and for the stabilisation of
financial instruments (included in EC Regulation 2273/2003) also apply as an
exemption from the prohibition of trading with inside information. This is also
the case if these instruments are traded in a market for financial instruments
that is not a regulated market for which the holder is licensed as stated in
Section 5:26(1) Wft. For instruments traded in a regulated market, this is
arranged in Section 5:56(5)(c) and (d) Wft.


This exemption also applies to obligations arising from the exchange of
convertible bonds or similar rights to shares, There may, however, also be
transactions that are necessary in order to meet delivery obligations arising for
other reasons. In these cases the transaction conducted in order to meet the
sale obligation or conversion obligation is exempt from the prohibition, but the
preceding purchase transaction that is necessary in some cases is not exempt.

For the application of this exemption, it is not important whether the
transaction takes place at the same time as, immediately after, or some
considerable time after, the allocation of the option rights or the issuance of
convertible bonds. Since these transactions are only exempt from the
prohibition to the extent that they are necessary in unchanged circumstances in
order to fulfil the obligation in question, the issuer must be able to demonstrate
this necessity. t must demonstrate that the number of financial instruments
that the legal entity possesses (either at that time, or in due course) does not
exceed the total (potential) supply in order to meet the delivery obligation. In
the case of interim disposal of financial instruments that are held in portfolio
for a future obligation, the premature sale must be evaluated in the light of the
prohibition of the use of inside information.

Commitment by a shareholder in the context of a public offer (Section 2(d) of
the Market Abuse (Financial Supervision Act) Decree)

The following act is exempt from the prohibition of the use of inside
information: entering into an agreement whereby a party entitled to financial
instruments irrevocably makes a commitment to an offeror, in the context of a
public offer that is (to be) proposed or is in preparation, to offer financial
instruments related to that public offer, to the offeror. The party entitled must in
this case establish the number of financial instruments to which the agreement
relates in a written statement to the offeror.

A party who is intending to make a public offer for financial instruments, and
who is therefore seeking the opinion of (major) shareholders as to whether they
are prepared to offer their financial instruments if such an offer is made, is
acting in accordance with the normal conduct of their duties, profession or
position. For such a party, it is important to be able to establish whether a
Proposed public offer has a chance of success. The (major) shareholder.
approached by the offeror with regard to the offer is thus in possession of inside
information. The testing of opinion by the offeror will be to no purpose if the
(major) shareholder is not able to indicate to the offeror whether it will support
the offer or not. Since the definition of the term ‘transaction’ in Section 5:56(1)
Wft is rather broad in practice, it could be assumed that a commitment by a
(major) shareholder constitutes the beginning of a transaction, and is therefore
prohibited.


AFM

Explanatory brochure on manipulative trading patterns



In this brochure, the AFM explains the regulations applying to insider dealing.
The regulations are pursuant to the European Market Abuse Directive, and are
stated in Section 5:56 of the Dutch Financial Supervision Act [Wet op het
financieel toezicht, or Wft] and in Section 2 of the Market Abuse (Financial
Supervision Act) Decree [Bes/uit marktmisbruik Wft]. This brochure also describes
the provisions related to the prohibition of insider dealing, such as the
exceptions to the prohibition, the reporting scheme, the regulations for insiders
and the insider lists. These provisions are included in Sections 5:59(1), 5:60 and
5:65 Wft and Sections 5 to 8, 10 and 11 of the Market Abuse (Dutch Financial
Supervision Act) Decree. The brochure also contains a practical manual
describing how notifications must be submitted to the AFM.

The purpose of this brochure is to provide a detailed description of the rules
applying to insider dealing and other related provisions. The brochure also refers
to relevant (legal) documents and other sources of information. This brochure is
intended to provide information. No rights may be derived from it. The AFM
advises persons consulting this brochure not take action solely on the basis of
this brochure. If the text of the brochure differs from the text of and notes to
the above-mentioned Act and Decree, the Act and Decree shall prevail.

The actual text of the European Directive, the Implementation Directives, the
Wft and the Market Abuse (Financial Supervision Act) Decree can be found at
the AFM's website: AFM > Legislation > Act on Financial Supervision (Wft) > Wft
Market Abuse Directive.


Persons who as a result of their profession, business or position have access to
inside information also qualify as primary insiders. Persons in possession of
inside information as a result of their involvement in criminal offences are also
considered to be primary insiders.

Primary insiders are deemed by virtue of their relationship to the issuer to be in
possession of non-public, inside information. As such, the question of whether
this category of persons knew or reasonably should have known that they
possessed inside information is not relevant.

Secondary insiders are all persons other than primary insiders. In the case of
secondary insiders it must be proved that they knew or reasonably should have
suspected that the information they possess constitutes inside information in
the sense of the Act. The reason for this distinction between primary and
seconday insiders lies in the fact that secondary insiders are less likely to realise
that they are in possession of inside information.


AFM

Inside information

Sal



11 Enforcement Overlaps with other elements in the Wft

Failure to satisfy the obligation to publish inside information in accordance with the
notification requirement in the Disclosure of Major Holdings and Capital Interests in
Securities-Issuing Institutions Act [Wet melding zeggenschap en kapitaalbelang in
effectenuitgevende instellingen, or “Wmz 2006”] or the obligations to publish when
making investment recommendations can also lead to an infringement of the
prohibition of market manipulation. Concealing relevant facts in, for instance, a
quarterly statement by an issuer, or concealing the existence of one’s own position
when making an investment recommendation, may constitute market manipulation.
These examples could qualify as transactions intended to mislead or deceive, or as the
dissemination of false or misleading information.


This exemption from the prohibition of the use of inside information is included
because it is possible that some managing directors, supervisory directors or
employees may regularly be in possession of inside information, so that it would
actually be impossible for them to exercise the options, convertible bonds,
warrants or similar rights granted to them under an employee benefit scheme.
These persons would in that case have to let their rights expire unused, which
would negate the purpose of granting them in the first place. The term of five
business days is included in order to make the exemption from the statutory
prohibition as brief as possible while giving sufficient opportunity for the actual
exercise of the rights concerned.

The exemption from the prohibition also applies to the sale of shares and
depositary receipts for shares arising from the exercise, if the sale takes place on
the expiration date of the right concerned or during the preceding five business
days. The person concerned must have notified the issuer in writing - at least
four months before the expiration date - of their intention to sell the shares
acquired immediately after the rights were exercised. This period of four months
is intended to prevent a situation in which persons in possession of inside
information at the time the rights are exercised can then decide whether to
dispose of the shares immediately or not.

If this notification has been made, the person concerned is obliged to actually
dispose of the shares they acquire. If they do not meet this obligation, the
prohibition fully applies to the sale. As often happens in practice, it is possible
for the beneficiary to establish their final decision by granting an irrevocable
power of attorney to the issuer. Since the beneficiary can no longer change their
mind, there is no possibility for them to make use of inside information.

Meeting delivery obligations (Section 2(c) of the Market Abuse (Financial
Supervision Act) Decree)

Transactions conducted or effected in order to be able to meet an obligation to
deliver shares or depositary receipts for shares are exempt from the prohibition
of the use of inside information. For instance, this concerns the fulfilment of an
obligation to deliver shares arising from the exercise of options or warrants
under an employee benefit scheme.


This brochure is designed to provide a general impression of the rules applying to the
prohibition of market manipulation. The brochure also refers to relevant (legal)
documents and other sources of information. It is intended to provide information, and
no rights may be derived from it. You should also not take action solely on the basis of
this brochure. If the text of the brochure differs from the text of and notes to the Wft or
the Market Abuse (Financial Supervision Act) Decree [Besluit marktmisbruik Wft,
hereinafter “the Market Abuse Decree”], the text of the Wft and the Market Abuse
Decree shall prevail.


The Authority for the Financial Markets

T 020 797 2000 | F 020 797 3800
Postbus 11723 | 1001 GS AMSTERDAM

www.afm.nl

The text in this brochure has been compiled with care and is informative in nature. No rights
may be derived from it, Decisions taken at national and international level may mean that the
text is no longer fully up-to-date when you read it. The AFM, the Netherlands Authority for the
Financial Markets, is not responsible or liable for any consequences - such as losses incurred or
lost profits — resulting from any action taken pursuant to information in this brochure

Amsterdam, March 2012


The Authority for the Financial Markets

The AFM promotes fairness and transparency within financial markets. We are the independent
supervisory authority for the savings, lending, investment and insurance markets. The AFM promotes
the conscientious provision of financial services to consumers and supervises the honest and efficient
operation of the capital markets. Our aim is to improve consumers’ and the business sector's
confidence in the financial markets, both in the Netherlands and abroad. In performing this task the
AFM contributes to the prosperity and economic reputation of the Netherlands.

The AFM operates in two areas:

Financial services

The AFM promotes due care in the provision of financial services to consumers. Businesses and persons
who provide financial services must be experts in their field, reliable and ethical. The information
provided by financial undertakings and pension providers shall be accurate, clear and not misleading.
Companies must act in the interests of their clients; a duty of care rests on them.

Capital markets

The AFM promotes the fair and efficient operation of the capital markets, on which investors can rely.
We enforce the rules for participants in the markets for equities and other securities. Market abuse —
use of inside information, market manipulation or misrepresentation — is forbidden. Listed companies
must publish inside information correctly and in a timely manner. We enforce the rules for the
issuance of securities and public takeover bids, for financial reporting and for auditors responsible for
auditing this reporting.


7__Enforcement by the AFM __

Trading with inside information is a serious offence. It is prohibited for everyone.

As stated in the introduction, the AFM proactively monitors the behaviour of
and transactions by investors in the market. If it has reason to do so, it will
conduct an investigation into compliance with the prohibition of the use of
inside information. The AFM's proactive supervision of the compliance by issuers
with their obligations - such as the publication of inside information without
delay - functions as an important source of signals of potential offences.

Observed developments in price or volume prior to the publication of inside
information can, after all, be an indication of trading with inside information.
Furthermore, professional market participants and private investors can report
suspicions of trading with inside information to the AFM.

In the context of its supervision of compliance with the regulations, the AFM
has the power to obtain information from any party that may reasonably be
assumed to possess information that is relevant to that supervision. If
transactions or other actions are effected in conflict with the regulations
relating to the use of inside information, administrative-law or criminal-law
sanctions may be imposed. In other words, the AFM can impose an
administrative penalty or refer the case to the Public Prosecution Service (PPS).

With regard to the supervision of compliance with the notification regulations,
the insider regulations and the compilation and updating of insider lists, the
AFM has a wide variety of supervisory measures at its disposal, such as the
issuance of an instruction. It may also impose an order subject to a penalty for
non-compliance or impose a penalty, or refer the case to the PPS. The measure
taken depends on the specific circumstances of the case concerned.

28


By ‘the nature of the transaction’ under item ‘f’, reference is made for instance to
purchase or sale.

Section 1:107(3)(c)(3°) Wft explicitly states that the addresses of persons with a
duty to notify shall not be included in the register of the AFM.

The address of the person with a duty to notify will not be made public and will
not be made available to third parties. The term ‘address’ of course also means
the place of residence.

4.4 When should notification take place?

Persons with a duty to notify must report transactions conducted or effected
for their own account not later than the fifth business day after the transaction
date.

If the notification concerns an issuer domiciled in the Netherlands or in another
Member State, notification must be made to the AFM. If the transaction
concerns an issuer domiciled in a non-Member State, the notification must be
made to the regulator in the Member State to which the issuer has to provide
the annual information relating to the shares (Section 10 of the Prospectus
Directive).

Notification can be delayed until such time as the value of the transactions
conducted for one’s personal account together with the value of the
transactions conducted for the personal account of related persons reaches EUR
5,000 in the calendar year in question (Section 5:60(2) Wft). This means that
notification is not compulsory if this amount is not reached in a calendar year.
The sum of EUR 5,000 has to be calculated on the basis of the price of the
financial instruments, in other words the purchase or sale price paid or received
for the acquisition or sale of the financial instruments. In the case of financial
instruments acquired for no consideration, this transaction does not need to be
reported until the limit of EUR 5,000 is reached. As soon as the limit of EUR
5,000 is reached due to other transactions, the transactions for no consideration
must be reported with the other transactions.

4.5 How should notification take place?

Notifications must be submitted to the AFM using the notification form
established for this purpose. This means that the administrative costs for those
with a duty to notify as kept as limited as possible, and that the flow of
information is channelled as efficiently as possible for the AFM.

The notification form can be downloaded from the AFM’s website (under
“forms’). You can send the completed form to the AFM, if applicable preceded by
a fax message to +31(0)20-797 3822. 2


Institutional brochure

The AFM has been supervising the prohibition of market manipulation for over three years. In this
period, the AFM has repeatedly encountered trading practices that it considers to be manipulative. This
brochure gives an overview of the situations encountered by the AFM in practice in recent years. It is
intended as a reminder to the market regarding trading practices that are prohibited at all times. By
explaining these examples, the AFM wishes to provide guidance to market participants for their
consideration of the question of whether their conduct could be considered to constitute manipulative.

The brochure is not intended as an account of past history. The descriptions given do not contain any
implications with regard to the frequency with which particular types of market manipulation occur or
the seriousness of the cases identified. The examples selected do not contain any indication regarding
the priorities of the AFM, nor should they be considered to be exhaustive.

Background

The Market Abuse Act [Wet marktmisbruik] took effect on 1 October 2005, and as of that date the AFM
accordingly became responsible for the supervision of the prohibition of market manipulation. The
Market Abuse Act has now been incorporated into the Financial Supervision Act [Wet op het financiee!
toezicht, or Wft]. This incorporation did not affect the prohibition of market manipulation as stated in
Section 5:58 Wft.

With the reprinting of the brochure ‘Prohibition of Market Manipulation’ in February 2007 and the
report titled ‘More than a year of market abuse’ published in March 2007 the AFM provided further
explanation of the rules and the way in which it conducts its supervision of the prohibition of market
manipulation. In the past three years, the AFM has provided additional information on the prohibition,
formulated as an open standard, through consultations held with the market and its fellow regulators,
and through the undertaking of enforcement measures.

In its consultations with the market, the AFM notes that there is a need for additional guidance
regarding the interpretation of the prohibition of market manipulation by the AFM and its application of
the prohibition in practice. This brochure is intended to meet this need by describing trading practices
that the AFM considers to be manipulative. It does not contain an exhaustive list of all manipulative
trading practices. The examples given are intended to illustrate the general standard, and do not imply
approval of other trading practices.

This brochure gives market participants guidance regarding the observance of the general standards
established in Dutch and European regulation, legislative history and case law. Market participants have
an own responsibility regarding their compliance with the regulations.

AFM guidance

The following overview is based on cases dealt with by the AFM and on the CESR’s classification of
various trading patterns and the indicated features of these patterns. Please see Level 3 - first set of
CESR guidance and information on the common operation of the Market Abuse Directive (CESR/04-505b
available at http://www.esma.europa.eu/ index.php?docid=3282). The situation sketches give some
examples of trading patterns that the AFM considers could constitute cases of market manipulation. The
Temporary Regulation regarding short selling introduced on 5 October 2008 is left out of consideration.


6 Implementation of the notification requirement

Investment firms do not have to make adjustments to their computer systems in
order to comply with the notification requirement, nor are they expected to actively
monitor all transactions for possible abuses. The regulations assume that when an
employee of an investment firm reasonably suspects that an order or transaction is in
conflict with the prohibition of insider dealing or the prohibition against market
manipulation, they will report their suspicions to the regulator.

The recognition of abuses heavily depends on the professional judgement of the

employee concerned. The investment firm is expected to provide adequate training

so that the professional judgement of its employees is brought and kept up to

standard. The investment firm itself is also expected to have adequate compliance

procedures installed. These (escalation) procedures ensure that:

¢ employees are aware of the obligation to notify without delay;

¢ employees know and recognise signals giving grounds for a reasonable suspicion
of market manipulation or trading with inside information;

¢ employees know what to do when they have a reasonable suspicion that market
manipulation or insider dealing is occurring;

¢ employees know who is responsible for establishing that a notification should be
sent to the AFM, and how this is established;

¢ employees know who will notify the AFM on this matter and how they will do
this; and

¢ — allemployees are aware of the potential internal and external sanctions that
apply in case of failure to comply with the notification requirement.

Clients with direct access to the market

In the situation where orders are entered by a client via a system maintained by a
broker/member or via a system providing direct access to the market without the
intermediation of the investment firm, investment firms are not required to actively
monitor these orders and transactions for suspicious trading.

In a situation where orders are entered or transactions are executed by a client in
another way than described above, and there are other reasonable grounds for
suspicion with regard to a particular client, the investment firm should include these
orders (whether executed or not) in its assessment.

In this context the AFM notes the obligation for regulated markets and multilateral
trading facilities to ensure that members, participants or users are in a position to
establish or identify conduct suggestive of market abuse. Serious abuses shall be
reported to the AFM.

The best-execution rule

The duty of investment firms to achieve the best execution of an order generally
means that the firm - within the limits and priorities of its policy for order execution -
- will execute the order on the trading platform offering the most favourable
conditions for order execution. In a situation where there is reasonable suspicion of


To clearly establish that a (major) shareholder is allowed to make a commitment
to the offeror, the making of a commitment in this context is exempt from the
prohibition of trading with inside information, subject to the condition that the
(major) shareholder specifies to the offeror, in writing, the number of financial
instruments it will offer. The offeror can moreover demonstrate with this
written statement that the testing of opinion was necessary.

For the sake of clarity, it should be noted that the commitment to support the
offer to the offeror is also made in the case that the opinion of the (major)
shareholder is tested by the target company (the company that is the subject of
the potential offer). This may or may not be as a result of the intermediation of
the target company.

The commitment to support the offer is made to the offeror and the ultimate
transaction will be concluded with the offeror. The exemption in this context
therefore also applies to the commitment to the offeror.

The offeror may come into possession of inside information as a result of
sounding out the opinion of (major) shareholders. By stating which (major)
shareholders have already indicated that they will accept the offer with respect
to their financial instruments in the offer announcement, the inside information
is made public, and after publication of the offer announcement the offeror is
no longer subject to the transaction prohibition. The same applies to the target
company that sounds out the opinion of (major) shareholders.

Commitment in the context of an issue (Section 2(e) of the Market Abuse
(Financial Supervision Act) Decree)

It is important to know whether a proposed issue or re-issue has a chance of
success. Entering into an agreement whereby a party entitled to financial
instruments or potentially entitled to financial instruments irrevocably commits
itself to the purchase of one or more of these financial instruments prior to an
issue or re-issue of these financial instruments by the issuer, is therefore exempt
from the prohibition against the use of inside information.

This exemption is subject to the condition that the party entitled or potentially
entitled has established the number of financial instruments or the financial
sum to which the agreement relates in a written statement to the issuer.

Since in the context of a proposed issue or re-issue the opinions of future
(major) shareholders are sometimes sounded out as are existing (major)
shareholders, the exemption also applies to the sounding out of the opinions of
potential (major) shareholders. The sounding out of opinions must be necessary,
and the commitment must be specifically established in a written statement to
the issuer. If the commitment is not established, the conditions attached to the


Party places a corresponding sell order. The buyer has an agreement with a third party to sell on part of
the stock. These actions give the appearance of a higher takeover offer so that the market could be
misled. The collusion in this example is primarily designed to frustrate a takeover bid.


Way of making information generally available

The law is principle based on how to make inside information generally available.
The issuer has its own responsibility for publishing the inside information, and
therefore also for the way by which it is made generally available, as long as the
following legal requirements are met.

How should information be made generally available?
The issuer makes regulated information generally available in full and without
amendment so that:

a. itis clear that the announcement concerns regulated information;

b. the public is able to assess the information properly and in good time;

c. the identity of the issuer concerned is clearly stated;

d. the subject is clear; and

e. the time and date of the press release is clearly stated.
The content of the press release must be clear and not misleading. A specific
headline that can be referred to, with a clear summary of the press release, is
recommended. The press release may not be combined with advertising of the
activities of the company if this would be potentially misleading.

Making information generally available simultaneously

Inside information must be made generally available in a press release. This must
be simultaneously published in the Netherlands and (if applicable) any other
Member State in which the financial instruments of the issuing institution have,
with its consent, been admitted to trading on a regulated market or MTF.

What language should be used?

The text of the press release shall be in Dutch or English. If the press release is to
be published in another Member State as well, the language accepted by the
national regulator must be used, or a language normally used in international
financial circles.

Website

The AFM opines that an issuer must have a website pursuant to Section
5:25m(3) Wft. In order to make the information easily accessible to investors,
the issuer must publish inside information on the website it uses for
communication with its shareholders.

In some cases this could also be the website of the issuer’s parent company or
another group company. This could be the case if:
1. the group structure is made clear on this website;
2. the issuer refers to this website in its own communication;
3. the issuer does not use another website to communicate with its
shareholders.


The Authority for the Financial Markets _

The AFM promotes fairness and transparency within financial markets. We are the independent
supervisory authority for the savings, lending, investment and insurance markets. The AFM promotes
the conscientious provision of financial services to consumers and supervises the honest and efficient
operation of the capital markets. Our aim is to improve consumers' and the business sector's
confidence in the financial markets, both in the Netherlands and abroad. In performing this task the
AFM contributes to the prosperity and economic reputation of the Netherlands.

The AFM operates in two areas:

Financial services

The AFM promotes due care in the provision of financial services to consumers. Businesses and persons
who provide financial services must be experts in their field, reliable and ethical. The information
provided by financial undertakings and pension providers shall be accurate, clear and not misleading.
Companies must act in the interests of their clients; a duty of care rests on them.

Capital markets

The AFM promotes the fair and efficient operation of the capital markets, on which investors can rely.
We enforce the rules for participants in the markets for equities and other securities. Market abuse —
use of inside information, market manipulation or misrepresentation — is forbidden. Listed companies
must publish inside information correctly and in a timely manner. We enforce the rules for the
issuance of securities and public takeover bids, for financial reporting and for auditors responsible for
auditing this reporting



Inside information

The provision regarding the publication of inside information (Section 5:59(1) of
the previous Wft) has been moved to Section 5.1.a of the Wft. The reason for
doing so is that inside information is designated as regulated information as
defined in the Wft.

Issuers are obliged to make inside information relating to their own company
generally available without delay. ‘Without delay’ means as soon as possible.
Publication should take place by means of a press release.

It is the responsibility of the issuer to make regulated (inside) information
generally available in full and without amendment in such a way that:

it is clear that the announcement concerns regulated information;
the public is able to assess the information properly and timely;
the identity of the listed company concerned is clearly stated;

the substance of the regulated information is clear; and

the time and date of the press release is clearly stated.

pao0o8

‘Specific information’
‘Significant’
The determination of what information constitutes inside information varies for
each company and sector, and furthermore depends on market sentiment and
recent developments. Other issues affecting whether information is inside
information or not are:

¢ how current is the information?

¢ to what degree does the information add to already existing information

on the same issue?
¢ to what extent is it new information?

To what extent information is inside information depends moreover on the
nature of the financial instruments concerned. Information having a significant
effect on the price of one particular financial instrument (for example, a share),
does not necessarily significantly affect the price of other types of financial
instruments (such as bonds).

There is no fixed and uniform formula for establishing when information has a
significant effect on prices. An issuer has its own responsibility for determining
whether information is inside information or not. It knows what is important for
its business and therefore for investors and potential investors in the company.
In cases of doubt as to whether the information that the issuer possesses
qualifies as inside information with respect to the issuer concerned, the AFM’s
advice is to publish it.


3 hold a management position and have the power for that reason to take
decisions affecting future developments and business prospects and who
may regularly have knowledge of inside information;

4 persons closely associated with the persons described in subsections 1, 2 or 3,
namely:
| spouses, registered partners or life companions, or other persons

cohabiting with the persons described as if in a marriage or registered
partnership;
{children under their authority or placed in guardianship and for whom
these persons have been appointed as guardian;
other relations by blood or affinity who on the date of the transaction
concerned have maintained a joint household with these persons for at
least one year; and
IV legal persons, trusts or partnerships

+ where the executive responsibility rests with a person as described in
subsections 1 to 4 III;

+ that are under the control of a person as described in subsections 1 to
Alll;

+ that were established for the benefit of a person as described in
subsections 1 to 4 Ill; or

+ whose economic interests are essentially equivalent to those of a
person as described in subsections 1 to 4 Ill.

The category of persons with a management position described in subsection 3

also includes persons working directly or indirectly under the management

board and who share responsibility for the future developments and business
prospects of the issuer as a whole.

4.3. What has to be notified?

The AFM must be notified of personal account transactions in shares issued by
the institution to which the person subject to the notification obligation is
affiliated, or in financial instruments whose value is partly determined by the
value of these shares,

A notification must include the following information:

a the name of the party with a duty to notify;

b_ the address of the party with a duty to notify;

c_ the name of the issuer involved;

d_ the reason for the notification;

e adescription of the financial instruments involved in the transaction
concerned

the nature of the transaction;

g_ the date and place of execution of the transaction;

h_ the price and size of the transaction.

=

20


Examples of inside information
The Explanatory Memorandum of the Market Abuse Act [Wet marktmisbruik]
cites a few examples of inside information. These include the following
situations:

¢ if there are amendments to the management or supervisory board of an

issuer;
¢ — ifa takeover is going to occur;
¢ — if a decision is taken by the issuer to repurchase its own shares.

The obligation to make information generally available means that significant
changes to previously published inside information must be published as soon as
possible (regardless of the effect on prices).

In addition to the above, the AFM identifies the following (but not exhaustive)
examples of information that may be inside information:

Important information regarding the issuer’s financial position and/or results:

¢ the announcement of periodic financial results;

¢ — significant differences from previous forecasts;

¢ the development of important new products;

¢ substantial changes in loans and collateral provided for loans, including
the breaking of covenants;

¢ the cancellation of important credit facilities by one or more banks;

¢ substantial changes to the financial reporting procedure;

* negative equity;

¢ change of auditor (under unusual circumstances);

¢ important legal proceedings/claims/product liability/environmental
damage/etc.

Important information regarding the company’s strategy:
¢ the purchase or sale of important shareholdings/business units;
¢ the initiation or termination of important joint ventures;
° sizeable reorganisation;
* changes to strategy; radical changes to the business of the company;
¢ dissolution of the company;
* filing for suspension of payments or bankruptcy.

Important information on capital and governance:

¢ — stock splits or reverse splits;

° changes to the rights associated with the various categories of financial
instruments;

¢ dividend announcements, including the ex-dividend date or changes
thereto and changes to dividend policy;

* significant changes to the distribution of share ownership and/or free
float;

¢ the initiation or implementation of protective measures.


2 What is a reasonable suspicion?

An investment firm should make its own assessment of whether there are reasonable
grounds for suspecting that a transaction or order involves market manipulation or
inside information. Should that be the case, it should be reported to the AFM. The
employees of the investment firm are expected to possess sufficient professional
judgement to be able to assess, in each case, whether a reasonable suspicion exists,
and when a case should be reported to the AFM.

If an investment firm decides to investigate suspicious behaviour itself, the fact that
it has initiated an investigation means that there is reasonable suspicion, which it
should report to the AFM without delay. Investment firms do not have to prove that
a case involves market manipulation or the use of inside information. Sufficient is
that there are reasonable grounds for suspicion. Certain transactions by themselves
may seem completely void of anything suspicious, but might deliver indications of
possible market abuse, when seen in perspective with other transactions, certain
behaviour or other information.


5 Justification for misleading signals and artificial price
levels

The first two variants of market manipulation (misleading signals and artificial price
levels) relate to the effect on the market, and are thus classified as a ‘gevolgdelict’: the
offence therefore lies in the effect of the action taken. The matter concerns the
incorrect or misleading signal and the artificial price level that is created by the
transactions or orders concerned. Under some circumstances and conditions however, it
is possible that such transactions may be legitimate or justifiable. This exception is
included in the prohibition provisions in Section 5:58(a) and (b) Wft as:

“...) unless the party that conducted or effected the transaction or trade order
demonstrates that it had a justified reason for conducting or effecting the transaction or
trade order, and that the transaction or trade order is in agreement with the accepted
market practice in the regulated market concerned.”

CESR has additionally given various interpretations with examples of practices that could
occasionally generate a misleading signal or an artificial price level but which
nevertheless should not automatically be qualified as market manipulation. These
include repo transactions, the lending of financial instruments, the giving of equities as
collateral, and normal legitimate arbitrage transactions.


1 Introduction:

Trading with inside information is a serious offence. It is prohibited for everyone.
Trading in financial instruments with inside information undermines the
confidence in the proper operation of the financial markets, since those who do
so seek to obtain an unfair advantage on the basis of the information they
possess. Adequate legislation to prevent the use of inside information has thus
been introduced to protect investor confidence.

A person who possesses inside information possesses certain information that
is confidential and not in the public domain. Such information, also known as
‘inside information’, can for instance relate to an imminent takeover or to
financial difficulties at an issuer. A person may possess inside information as
part of their duties, profession or position at an issuer, for example directors,
lawyers or employees. It is also possible that a person may come into possession
of inside information without intending to do so; for instance, this may occur
because they hear their neighbour or acquaintance who happens to be a
director of an issuer talking in the garden, or on the train.

When published, inside information can affect the price of an issuer's financial
instruments. The issuer is obliged to publish this information without delay (i.e.,
as soon as possible), so that all investors are aware of the inside information
and all investors have an equal opportunity to realise a good return.

If a person desires to profit from inside information (and therefore from the
expected price development of the issuer's shares, for example) and decides to
buy or sell these financial instruments before the inside information is
published by the issuer, they are trading with inside information. This is
forbidden. It is also forbidden to share inside information with a third party or to
advise a third party to effect transactions in the financial instruments to which
the inside information relates.

The AFM takes its duty as the regulator of the prohibition of trading with inside
information extremely seriously. It actively monitors behaviour and transactions
by investors in the market. If certain trading actions are in breach of the
prohibition, these actions will result in an administrative-law or criminal-law
sanction. In other words, the AFM can impose a penalty or refer the case to the
Public Prosecution Service (Openbare Ministerie, or PPS).


¢ The consistent prevention of a fall in prices in order to satisfy a credit assessment,
bank agreement or other hedge-related purposes.

¢ The quotation of illogical, excessive or inconsistent bid or offer prices through an
intermediary, in order to profit from a lack of competition or liquidity.

¢ To secure a dominant position over the supply of or demand for a financial
instrument which has the effect of fixing, directly or indirectly, purchase or sale
prices or creating other unfair trading conditions for the same or a related financial
instrument.

¢ The simultaneous buying and selling of financial instruments by the same person
(who is thus trading with himself) at a price that is different from the normal trading
bandwidth, in particular if this person at the same time has a position in a related
financial instrument (for example, derivatives).

c) Transactions or orders designed to deceive or mislead:

¢ Actions designed to conceal the actual beneficial interest, so that any kind of
reporting requirement is evaded or avoided, or so that no actual information is
otherwise disclosed regarding the underlying position in the financial instrument.

¢ The taking of a long or short position and the subsequent dissemination of a false or
misleading positive or negative message, with a view to then closing the position.

* Entering into a position for which a reporting requirement exists, in order to cancel
the position immediately after it is reported.

¢ Taking advantage of access to the media by disseminating an opinion regarding a
financial instrument or institution while previously having taken positions in this
financial instrument, in order to affect the price of the financial instrument by
expressing this opinion without disclosing that one has a conflict of interest.

d) Dissemination of misleading or false information

* The dissemination of false or misleading information regarding a financial instrument
or company by means of a press release or by placing a message on a website.

¢ Issuing misleading signals other than through communications or the media, for
example by moving or storing commodities in order to give a false impression of the
demand for or supply of a commodity.

For more examples, please refer to the brochure on Manipulative Trading Patterns.


8 How the AFM supervises the notification
requirement

The AFM assesses each report of a suspicious transaction separately, to establish
whether there has been an infringement of the prohibition of trading with inside
information and/or market manipulation. The emphasis is on the quality of the
reports, not the quantity. In each case, there has to be a reasonable suspicion that
trading with inside information or market manipulation is involved. In its supervision
of these matters, the AFM requests information from investment firms on the
procedures they use for their compliance with the notification requirement.

In its ongoing investigations of trading with inside information or market
manipulation, the AFM may encounter a failure by an investment firm to comply with
the notification requirement. The practice by an investment firm of intentionally
‘turning a blind eye’ in order to preserve a good commercial relationship will not be
tolerated.

The AFM can impose measures to enforce the notification requirement on an
investment firm, including issuing a demand for information, issuing an instruction or
imposing enforcement action, or it can impose a penalty retrospectively. The AFM
can also refer a case to the Public Prosecution Service. The AFM determines which
measure is appropriate in each individual case.


The Authority for the Financial Markets

The AFM promotes fairness and transparency within financial markets. We are the independent
supervisory authority for the savings, lending, investment and insurance markets. The AFM
promotes the conscientious provision of financial services to consumers and supervises the honest
and efficient operation of the capital markets. Our aim is to improve consumers’ and the business
sector's confidence in the financial markets, both in the Netherlands and abroad. In performing this
task the AFM contributes to the prosperity and economic reputation of the Netherlands.

The AFM operates in two areas:

Financial services

The AFM promotes due care in the provision of financial services to consumers. Businesses and
persons who provide financial services must be experts in their field, reliable and ethical. The
information provided by financial undertakings and pension providers shall be accurate, clear and
not misleading. Companies must act in the interests of their clients; a duty of care rests on them.

Capital markets

The AFM promotes the fair and efficient operation of the capital markets, on which investors can
rely. We enforce the rules for participants in the markets for equities and other securities. Market
abuse ~ use of inside information, market manipulation or misrepresentation — is forbidden. Listed
companies must publish inside information correctly and in a timely manner. We enforce the rules
for the issuance of securities and public takeover bids, for financial reporting and for auditors
responsible for auditing this reporting.


12 Additional notes on certain elements

‘Artificial level’

The expression ‘artificial level’ requires further explanation. Its interpretation is difficult
and therefore it is difficult to apply. The Explanatory Memorandum to the Market Abuse
Act defines a price level as artificial if:

(1) the price is artificially created outside the normal supply and demand factors, and
(2) this does not form a real reflection of the actual financial and economic
circumstances of the financial instrument in question or the issuer.

It is certainly not the case that price manipulation that does not create abnormal price
levels can be justified. The Act speaks of the ‘intention’ to maintain or bring a price to an
artificial level. The issue is therefore not restricted to the ultimately achieved price, it
also concerns the nature and intention of the actions involved. So the question of
whether a price is artificial is not determined solely on the basis of the price of the
financial instrument in comparison to any other price, it also concerns the way in which
supply and demand have been created.

The degree to which a price differs from a particular average is only relevant for a
possible additional confirmation or negation of the suspicion of manipulation, and as an
aspect in the determination of the seriousness of any (punitive) measures. A price that
widely differs from normal values may also be a signal of possible market manipulation.
However, a stable price may also be artificial, for example after bad news, or in order to
satisfy the conditions of a convertible bond.

‘Misleading signals’

The same principle applies to the term ‘misleading signal’. Whether a signal is
misleading cannot be determined solely by considering the nature of the signal or how it
may be perceived by the average investor. This question may also be decided on the
basis of the nature and intention of the action whereby the signal was created.

The role of special market participants

Market-makers, liquidity providers, major shareholders and issuers of instruments such
as warrants and structured notes have a special role. Their responsibilities include the
addition of liquidity. At the same time, this role means that in many cases they have a
dominant position in a specific market. Due to this (dominant) position, they will
sometimes have to act with caution. On the other hand, in certain circumstances they
will be forced by market developments to take actions in order to be able to fulfil their
special responsibilities that at first glance may appear to constitute market
manipulation, but which cannot and should not be considered as such in order to allow
the market to function properly.

The role of ‘time’

The length of time is not a factor in market manipulation. The market can be
manipulated over a long period or for only a few seconds. The length of time that a
specific price is maintained at an artificial level or the period during which investors are


2 Legal basis

The prohibition of market manipulation is contained in Section 5:58 of the Wft. The
prohibition is pursuant to the Market Abuse Directive 2003/6/EC and the
Implementation Directive relating to the prohibition of market manipulation
2003/124/EC. This implementation directive contains signals that the regulator must
specifically take into account in its assessment of potential cases of market
manipulation.

In addition, Commission Regulation 2273/2003 prescribes two exceptions from the
prohibition of market manipulation. This Regulation has not been converted into Dutch
law, but it has direct effect. Lastly, CESR, the collective body of European market
regulators, has issued additional guidance and interpretation in relation to how its
members, which include the AFM, should apply the prohibition of market manipulation.
The actual texts of the European directive [*] and implementation directives, the
Commission Regulation [’], the Wft, the Market Abuse Decree and the guidance from
CESR can be found on the AFM’s website (www.afm.nl) under ‘Market Abuse’.

' Directive 2003/6/EC of the European Parliament and of the Council of 28 January 2003 on insider
dealing and market manipulation.

* Commission Regulation (EC) no. 2273/2003 of 22 December 2003 implementing Directive
2003/6/EC of the European Parliament and of the Council as regards exemptions for buy-back
programmes and stabilisation of financial instruments.


Choice of lists

The reasons why people may appear on an insider list falls generally into two
categories: those who regularly may have knowledge of inside information, and
those who occasionally may have knowledge of inside information.

An issuer or any party acting for or on its behalf may decide to use a list of all
the employees that are or could be involved in a project or transaction whereby
they could become aware of inside information, or to use separate lists (for
example one list of employees and another list of projects) instead of one
integrated list.

It is expressly not the intention that all the employees of the issuer or all the
employees of the party acting for or on its behalf should be included on the list

without further qualification. This does not benefit either the issuer or the AFM.

6.3. Submission to the AFM?

The insider list does not have to be submitted to the AFM. This of course does
not mean that the preparation of such lists is voluntary. The AFM supervises the
compliance with the prohibition of the use of inside information. If the AFM
wishes to review the list during an investigation into the use of inside
information, it will request the issuer to provide a copy.

27


Further questions?

The Securities Markets and Financial Infrastructure Supervision Division [afdeling Toezicht Effectenmarkten
en Financiéle Infrastructuur, or TEF!] of the AFM is the contact point for questions relating to the necessity
and timing of publication of inside information and other queries regarding market abuse. In addition to this
brochure, advice will be provided regarding good practices on a regular basis.

Further information can be found at www.afm.nl under ‘Professionals’ > Market Abuse’.

For questions and advice, you can send an e-mail to marketsupervision@afm.nl or contact the TEFI
Department by telephone on +31 (0)20 797 37 77.

Please note that telephone conversations with the TEFI department may be recorded for supervisory
purposes.


8 Notification requirement for suspicious transactions

Investment firms are obliged to report suspicious transactions to the AFM. This applies
to suspected cases of market manipulation as well as to suspicion of trading with inside
information. A separate brochure has been published to deal with the notification
requirement (see Section 5:62 Wft, the notification of suspicious transactions). The
information in this brochure can be used by investment firms to determine when, how
and in which cases suspicious transactions must be reported.


Introduction

In this brochure the AFM explains the regulations applying to the obligation
oninvestment firms to report reasonable suspicions of market abuse, the ‘notification
requirement for suspicious orders or transactions’. In addition to describing the rules
that apply, this brochure addresses some of the practical aspects of the notification
requirement.

Briefly put, the regulations place an obligation on investment firms to report cases
involving a reasonable suspicion of trading with inside information or market
manipulation to the AFM without delay (in other words, as soon as possible). The
provision is preventive in nature: if people are aware that a ‘suspicious’ order or
transaction will be reported by those involved in its execution, this may deter them
from conducting the transaction.

The notifications submitted by investment firms also support the regulator in its
supervision of market abuse, which contributes to investor confidence in the
financial markets. The notification requirement relates to a transaction or an order to
trade that may be in conflict with the prohibition of the use of inside information
(Section 5:56(1) or (3) of the Financial Supervision Act [Wet op het financieel toezicht,
hereinafter “Wft”] or the prohibition of market manipulation (Section 5:58(1) Wft).
These rules are the direct consequence of the European Market Abuse Directive and
are established in the Netherlands in Sections 5:62 and 5:63 Wft and Section 9 of the
Market Abuse Decree [Bes/uit marktmisbruik Wft, hereinafter “the Market Abuse
Decree”).

The purpose of this brochure is to provide general information on the rules applying
to the notification requirement. The brochure also refers to relevant (legal)
documents and other sources of information. It is solely intended to provide
information. No rights can be derived from it.

If the text of the brochure differs from the text of above-mentioned Act and Decree
and the notes thereto, the Act and Decree shall prevail. The actual texts of the
European Market Abuse Directive, the Wft, the Market Abuse Decree can be found
on the AFM’s website www.afm.n/ at the 'Market Abuse' section.


The issuer should keep the information accessible on the website for at least one
year. The AFM’s advice, for that matter, is to keep press releases available for a
longer period.

In order to meet the obligation to make information generally available, it is not
sufficient to publish the press release only on the issuer’s own website. The
issuer must also publish a press release as described above (‘how should
information be made generally available?’).

It is recommended that the issuer protects its information on a properly secured
website, in order to prevent access to its inside information prior to the
information being made generally available.

Send the press release also to the AFM

If the issuer decides to publish a press release, a copy must be sent to the AFM
at the same time it is released to the market. Please note: since the issuer has its
own responsibility for the distribution of the press release, sending it only to the
AFM is not sufficient (see above). The AFM prepared an electronic form that can
be sent to the AFM in a secure way for the notification of inside information. The
form can be used with Acrobat Reader version 7.0 or more recent, and allows for
fields to be completed and electronic attachments to be added. Any issuer can
obtain this form from the AFM website. The issuer is allocated a password-
protected account by the AFM in order to access the AFM portal.

After the AFM has established that the press release received has been made
generally available, it is filed in the register maintained by the AFM
(www.afm.nl), where it can be viewed by anyone for five years free of charge.

Time of publication

The AFM recommends that issuers make press releases relating to planned
events generally available outside market hours, subject to legal conditions.
This applies for instance to the publication of annual, semi-annual and quarterly
figures. In case of ‘unexpected’ events, obviously these press releases must be
issued without delay.

The issuer has its own responsibility

In all cases the issuer itself remains responsible for making inside information
generally available, even when this is actually carried out by third parties such as
a communications consultancy, a primary information provider or a
receiver/administrator.


9 Signals

The signals that can be used by the AFM to decide to initiate an investigation include the

following. They can also be taken into consideration in the assessment of the case if

market manipulation is identified:

¢ The degree to which the market is disrupted in terms of the number and size of
transactions in relation to the normal size of the market;

¢ The degree to which the resulting volatility and price differs from the normal
conditions in the market;

¢ The degree to which the party conducting the trading has, obtains or loses a
dominant market position in the financial instrument in question;

° The degree to which transparency in the market is negatively affected by the
trading;

¢ The degree to which the risk/return profile of the party conducting the trading is
improved as a result of the trading and that of other parties is negatively affected
during or as a result of the trading;

¢ The degree to which additional benefits are sought or achieved through the conduct
of the trading in addition to any intention to make a profit or avoid a loss.


transactions conducted or effected by the authorised representative, and
otherwise only in periods in which there is no question of inside information (as
indicated in the issuer's regulations, known as ‘open periods’).

Since these transactions are not effected by the insider with the duty to notify,
they are exempt from the notification requirement on the basis of Section
5:60(1) Wft. Obviously, the authorised representative does not have to report the
transaction, as he does not belong to the group of insiders with a duty to notify.

For the sake of completeness, it should be noted that a single irrevocable buy or
sell order whereby the authorised representative intends to buy or sell financial
instruments of the issuer concerned during a certain period established in
advance cannot be equated with a discretionary management mandate. As part
of a discretionary management mandate the authorised representative has
freedom of choice regarding investment and reinvestment, and is moreover
authorised to replace the existing securities (funds, financial instruments, etc.)
with others.

It should be noted that transactions pursuant to a discretionary management
mandate, to the extent applicable, have to be reported to the AFM pursuant to
Section 5:38(1) or (2), or 5:48(6) of the Wft.

4.7 The AFM register
With the exception of the address of the party with a duty to notify, the
information notified is included in the public register on the website of the AFM..

23


8 Questions

Further information on the prohibition of trading with inside information is

available at www.afm.nl.

The Securities Markets and Financial infrastructure Supervision Division
[afdeling Toezicht Effectenmarkten en Financiéle Infrastructuur, or TEFI] of the
AFM is the contact point for questions relating to inside information. For
questions and advice, you can send an e-mail to marketsupervision@afm.nl or
contact the TEFI Department by telephone on +31 (0) 20 797 3777.

Please note that telephone conversations with the TEFl Department may be
recorded for supervisory purposes.

29


13 Further questions?

The Securities Markets and Financial Infrastructure Supervision Division [afdeling
Toezicht Effectenmarkten en Financiéle Infrastructuur, or TEF!] of the AFM is the contact
point for questions relating to market manipulation.

Further information can be found at www.afm.n/ under ‘Professionals’> ‘Market Abuse’.

For questions and advice, you can send an e-mail to marketsupervision@afm.nl or
contact the TEFI Department by telephone on +31 (0) 20 797 3777.

Please note that telephone conversations with the TEFl Department may be recorded
for supervisory purposes.


Wash Trades

¢ This is the practice of entering into arrangements for the sale or purchase of financial instruments
where there is no change in beneficial interest or market risk or where the transfer of beneficial
interest or market risk is only between parties who are acting in concert or collusion (other than
repo transactions and securities lending).

Example:

Collaboration between two market participants executing a transaction visible to third parties ona
trading platform (MTF or RM) and (at the same time) executing an opposite OTC transaction that is not
immediately visible to third parties.

Coliuding in the after market of an Initial Public Offer

¢ After institutions have been allocated financial instruments in the primary offering, they purchase
more of these instruments in the secondary market in order to drive up the price in order to be able
to sell the financial instruments obtained in the primary offering and in the secondary market at a
higher price.

Example:

Institutions take the financial instruments allocated to them in a primary offering onto their own book
and purchase additional financial instruments when trading begins, or shortly thereafter, for their own
account and risk. This gives the appearance of heavy demand and leads to an exaggerated price,
allowing these market participants to dispose of all or part of their position at this higher market price.

Abusive squeeze

* Actions designed to achieve an artificial price level at which other market participants have to deliver,
take delivery or defer delivery in order to satisfy their obligations in relation to a financial
instrument. Such actions are taken by a market participant with a position in a financial instrument
and thus having a significant influence on the supply of, or demand for, or delivery mechanisms for
that financial instrument and/or a derivative of that financial instrument.

Example:

A market participant purchases an (illiquid) stock to the extent that other market participants, such as a
liquidity provider, have a short position in the stock in question. At the same time, the same market
participant or an affiliated party creates a shortage of the stock, for example by borrowing the stock in
order to subsequently enforce delivery.

Marking the Close / Ramping
This is the purchase or sale of financial instruments at the close of the market in order to affect the
closing price of the financial instrument concerned.

Examples:

-  Inanumber of less liquid (auction) stocks, limited buy orders are placed, sized one with a bid price
higher than the previous traded price. These orders achieve a higher closing (auction) price so that a
(paper) profit is created on a previously existing position. This practice may take place on any trading
day, but is particularly associated with derivative instruments expiry dates or quarterly/annual portfolio
valuation dates.


It is not important whether the transaction actually takes place via the systems
of the market in financial instruments in question. For example, bonds admitted
to trading on Euronext Amsterdam also fall under the scope of the prohibition,
as does a transaction in these financial instruments conducted over-the-counter
(OTC) or via the systems of another platform.

Trading with inside information is therefore forbidden in or from the
Netherlands. This also applies if the trading concerns financial instruments that
are not admitted to trading on a Dutch regulated market but are traded ona
European regulated market or one of the government-approved markets in
financial instruments in a non-Member State (for instance, an American
financial market).

To qualify as a transaction in the Netherlands, the person conducting or
effecting the transaction may be in the Netherlands or abroad, while the
transaction is conducted via the systems of a market in financial instruments in
the Netherlands. A transaction also qualifies as a transaction in the Netherlands
if the counterparty (in a private transaction) is located in the Netherlands. To
qualify as a transaction from the Netherlands, the person must be in the
Netherlands at the time the transaction is conducted or effected. In this case
the transaction is effected via the systems of a market in financial instruments
located abroad or with a counterparty located abroad (if for instance a
transaction arising from a contract is involved). The location of the bank
executing the transaction is not relevant, since the prohibition applies to the
person effecting the transaction and not the bank.

The scope of the prohibition makes it clear that the prohibition of insider
dealing also applies to trading in financial instruments admitted to a
multilateral trading facility for which the investment firm holds a licence as
referred to in Section 2:96 Wft, such as Alternext Amsterdam or NYSE

Arca Europe.

2.3. Whois subject to the prohibition?

The prohibition of insider dealing applies to everyone. The prohibition
distinguishes between two categories: primary insiders and secondary insiders,
Primary insiders are (briefly) those who are in a special relationship with the
issuer, such as managing and supervisory directors of an issuer, or persons who
have a qualified holding in the issuer.


Further questions?

The Securities Markets and Financial Infrastructure Supervision Division [afdeling
Toezicht Effectenmarkten en Financiéle Infrastructuur, or TEFI] of the AFM is the
contact point for questions relating to inside information and other queries
regarding the provisions on market abuse in the Wft.

Further information can be found at www.afm.nl under ‘Professionals’ > ‘Market
Abuse’.

For questions and advice, you can send an e-mail to marketsupervision@afm.n!
or contact the TEFI Department by telephone on +31 (0) 20 797 37 77.

Please note that telephone conversations with the TEFI department may be
recorded for supervisory purposes.


having a significant influence over the supply of, demand for, or delivery
mechanisms for that financial instrument or a derivative product.

Trading in one market with a view to improperly influencing the price of the
same or a related financial instrument in another market. This involves
influencing the price of correlated financial instruments.

Transactions which appear to have the purpose to prevent a fall in prices in order
to satisfy a credit assessment, bank agreement or other hedge-related purposes.
The quotation of illogical, excessive or inconsistent bid or offer prices through an
intermediary in order to profit from a lack of competition or liquidity.

The obtaining of significant influence over the demand for or supply of a financial
instrument in order to materially distort the price or other delivery mechanisms
of the financial. instrument or derivative product.

The simultaneous buying and selling of financial instruments by the same person
(who is thus trading with himself) at a different price from the normal trading
bandwidth, in particular if this person at the same time has a position in a related
financial instrument (for example, derivatives).

¢) Transactions or orders designed to deceive or mislead:

Transactions designed to conceal the ownership of a financial instrument so that
any kind of reporting requirement is evaded or avoided, or so that no
information is otherwise disclosed regarding the true underlying holding.

The taking of a long or short position and the subsequent dissemination of a false
or misleading positive or negative message with a view to then closing the
position.

Opening a position for which a disclosing requirement exists in order to close the
position immediately after it is disclosed.

Profiting from access to the media by disseminating an opinion regarding a
financial instrument or institution while previously having taken positions in this
financial instrument in order to affect the price of the financial instrument by
expressing this opinion without revealing that one has a conflict of interest.

Examples of potential trading with inside information

A client opens an account and immediately gives an order to conduct a significant
transaction in a specific financial instrument — especially if the client is insistent
that the order is carried out very urgently, or must be conducted before a
particular time specified by the client.

The client’s requested transaction or investment behaviour is significantly out of
character with the client’s previous investment behaviour (e.g. type of financial
instrument, size of the order, amount to be invested, or duration of holding).

The client specifically requests immediate execution of an order regardless of the
price at which the order would be executed (this indicator pre-supposes more
than the simple placing of a “market order” by the client).

Significant trading by major shareholders or other insiders before the
announcement of important corporate events.

Unusual trading in the shares of a company before the announcement of inside
information relating to the company; transactions resulting in sudden and


The Authority for the Financial Markets
T +31(0)20 797 2000 | F +31(0)20 797 3800
Postbus 11723 | 1001 GS AMSTERDAM

www.afm.nl

The text in this brochure has been compiled with care and is informative in
nature. No rights may be derived from it. Decisions taken at national and
international level may mean that the text is no longer fully up-to-date when you
read it. The AFM, the Netherlands Authority for the Financial Markets, is not
responsible or liable for any consequences - such as losses incurred or lost
profits - resulting from any action taken pursuant to information in this
brochure.

Amsterdam, April 2011

20


4 Notification regulations

4a Introduction

The regulations established in Sections 5:60 and 5:61 Wft and Sections 5 to 8 of
the Market Abuse (Financial Supervision Act) Decree contain — briefly put—the
obligation for persons working at an issuer or persons closely connected to them
to report transactions conducted or effected for their own account in financial
instruments relating to the issuer in question (hereinafter: “the notification
regulations”). They must notify the AFM of transactions for their own account in
shares issued by the institution for which they work, or in financial instruments
whose value is partly determined by the value of these shares. This provides
transparency regarding transactions conducted by persons with policy-making
responsibilities at issuers and, if applicable, by persons closely connected to
them. This is a preventive measure against market abuse. Notification of these
transactions is a valuable source of information for investors.

4.2 Whois subject to the notification requirement?

The obligation to report transactions in shares (or financial instruments whose

value is partly determined by the value of these shares) of their own issuer

applies to persons designated as insiders:

1 of an issuer with domicile in the Netherlands or an issuing institution with
domicile in a state that is not a Member State that has issued or proposes to
issue financial instruments as referred to in Section 5:56 (1)(a) Wft;

2 of an issuer with domicile in the Netherlands that has issued or proposes to
issue financial instruments as referred to in Section 5:56 (1)(b) Wft, or

3 of an issuer with domicile in another Member State that has issued or
proposes to issue financial instruments as referred to in Section 5:56 (1)(d)
wft,
or to any person on whose proposal a purchase agreement regarding a
financial instrument as referred to in the subsection concerned other than a
security is drawn up or who proposes to draw up a purchase agreement
regarding a financial instrument other than a security as referred to in the
subsection concerned.

Transactions that are exempt from the prohibition of the use of inside
information must also be reported to the AFM.

The obligation to notify applies to all persons involved with an issuer as stated

above, who:

1 determine or co-determine the day-to-day policy of an issuer (for example,
the directors);

2 supervise the policy and the general affairs of an issuer and the related
enterprise (the supervisory directors);


3 Scope and prohibitory provision

The prohibition of market manipulation applies to everyone. The prohibition of market
manipulation applies to both natural persons and institutions.

There are four categories of market manipulation:

It is prohibited to:

a) conduct or effect a transaction or order to trade in financial instruments that give,
or are likely to give, false or misleading signals as to the supply of, demand for or
price of financial instruments;

b) conduct or effect a transaction or order to trade in financial instruments to secure
the price of financial instruments at an abnormal or artificial level;

c) conduct or effect a transaction or order to trade in financial instruments which
employ deception or contrivance; or

d) disseminate information which gives, or is likely to give, false or misleading signals
as to the supply of, demand for or the price of financial instruments, where the
person who made the dissemination knew, or ought to have known, that the
information was false or misleading. The scope of the prohibition is very broadly
formulated.

The term ‘financial instruments’ is defined as financial instruments admitted to trading
or for which admission to trading has been applied for in a regulated market or
multilateral trading facility situated or operating in the Netherlands or another member
state, or in a system comparable to a regulated market or multilateral trading facility
situated and officially recognised in a state that is not a member state.

If an offence against the prohibition of market manipulation originates in the
Netherlands and takes place in another member state it is punishable in the
Netherlands, however in this case the regulator in the other member state is the
primary regulator and not the AFM. In cross-border cases, European regulators may
exchange information and offer assistance to each other, and establish a collective
enforcement strategy.

The AFM has the authority to designate categories of transactions or trade orders as
transactions or trade orders that are considered to fall under categories a) to d)
specified above.


Role of the AFM

The AFM receives press releases at the same time as they are made generally
available. In this situation everyone has access to the inside information
concerned simultaneously. The AFM does not approve press releases prior to
publication,

Enforcement

In its supervision on the duty to make inside information generally available
without delay, the AFM has various enforcement measures at its disposal,
including requesting information, imposing.an administrative enforcement order
or an administrative fine, and the publication thereof. The AFM can also refer a
case to the Public Prosecutor.

Trade suspensions

The AFM can also suspend trading. In this case the AFM issues an instruction to a
regulated market in the Netherlands, a MTF or a systematic internaliser to
suspend, interrupt or cancel trading in certain financial instruments. The AFM
may, for instance, take such action if an issuer fails to comply with the obligation
to publish inside information without delay.

A consideration for the AFM to suspend trading would be for example if an
inequality of information in the market needs to be resolved.

The AFM decides whether to suspend trading on a case-by-case basis. The AFM
uses this power cautiously and with due care.

NYSE Euronext Amsterdam is normally responsible for technical trading
measures. This also applies to other trading platforms. Examples are trade
interruptions in the case of a large share price movement, whereby trading is
automatically halted for a short time when a threshold value is breached. In the
event of a technical failure, as well, whereby a significant proportion of stock
exchange members are not able to enter orders in the trading system, NYSE
Euronext or other trading platforms normally have their own responsibility for
such measures.


trading with inside information or market manipulation, an investment firm must
follow the rules that apply to this obligation. This may mean that the order will not
be accepted, or that its execution will be delayed on the grounds that the investment
firm is complying with its statutory obligations.


9 Further questions?

The Securities Markets and Financial Infrastructure Supervision Division [afdeling
Toezicht Effectenmarkten en Financiéle Infrastructuur, or TEFI] of the AFM is the
contact point for questions relating to the notification requirement (and other
queries regarding the Market Abuse Act [Wet marktmisbruik]).

Further information can be found at www.afm.n! under ‘Professionals’ > ‘Market
Abuse’.

For questions and advice, you can send an e-mail to marketsupervision@afm.nl or
contact the TEFI Department by telephone on +31 (0) 20 797 3777.

Please note that telephone conversations with the TEFI department may be
recorded for supervisory purposes.