Commission Directive 2003/124/EC of 22 December 2003 implementing Directive 2003/6/EC of the European Parliament and of the Council as regards the definition and public disclosure of inside information and the definition of market manipulation (Text with EEA relevance)
Date: 2003-12-22
Institutions: European Commission
Subjects: capital market, confidentiality, dissemination of information, financial instrument, insider trading

L 339/70

EN

Official Journal of the European Union

24.12.2003

COMMISSION DIRECTIVE 2003/124/EC

of 22 December 2003

implementing Directive 2003/6/EC of the European Parliament and of the Council as regards the
definition and public disclosure of inside information and the definition of market manipulation

(Text with EEA relevance)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European
Community,

Having regard to Directive 2003/6/EC of the European Parlia-
ment and of the Council of 28 January 2003 on insider dealing
and market manipulation (market abuse) (1), and in particular
the second paragraph of Article 1 and the first, second and
third indents of Article 6(10) thereof,

After consulting the Committee of European Securities Regula-
tors (CESR) (2) for technical advice,

Whereas:

(1)

(2)

(3)

(4)

Reasonable investors base their investment decisions on
information already available to them, that is to say, on
ex ante available information. Therefore,
the question
whether, in making an investment decision, a reasonable
investor would be likely to take into account a particular
piece of information should be appraised on the basis of
the ex ante available information. Such an assessment has
to take into consideration the anticipated impact of the
information in light of the totality of the related issuer's
activity, the reliability of the source of information and
any other market variables likely to affect the related
financial
instrument
instrument or derivative financial
related thereto in the given circumstances.

Ex post information may be used to check the presump-
tion that the ex ante information was price sensitive, but
should not be used to take action against someone who
drew reasonable conclusions from ex ante information
available to him.

Legal
certainty for market participants
should be
the
enhanced through a closer definition of
two of
elements essential to the definition of inside information,
namely the precise nature of that information and the
significance of its potential effect on the prices of finan-
instru-
cial
ments.

instruments or related derivative financial

Not only does the protection of investors require timely
public disclosure of inside information by issuers, it also
requires such disclosure to be as fast and as synchronised
investors in all
as possible between all categories of

(1) OJ L 96, 12.4.2003, p. 16.
(2) CESR was established by Commission Decision 2001/527/EC (OJ L

191,13.7.2001, p. 43).

financial

Member States in which the issuer has requested or
approved admission of
to
its
trading on a regulated market, in order to guarantee at
Community level equal access of investors to such infor-
mation and to prevent
insider dealing. To this end
Member States may officially appoint mechanisms to be
used for such disclosure.

instruments

(5)

(6)

(7)

In order to protect the legitimate interests of issuers, it
should be permissible, in closely defined specific circum-
stances, to delay public disclosure of inside information.
However, the protection of investors requires that in
such cases the information be kept confidential in order
to prevent insider dealing.

In order to guide both market participants and compe-
tent authorities, signals have to be taken into account
when examining possibly manipulative behaviours.

The measures provided for in this Directive are in
accordance with the opinion of the European Securities
Committee,

HAS ADOPTED THIS DIRECTIVE:

Article 1

Inside information

1.
For the purposes of applying point 1 of Article 1 of
Directive 2003/6/EC, information shall be deemed to be of a
precise nature if it indicates a set of circumstances which exists
or may reasonably be expected to come into existence or an
event which has occurred or may reasonably be expected to do
so and if it is specific enough to enable a conclusion to be
drawn as to the possible effect of that set of circumstances or
event on the prices of financial instruments or related derivative
financial instruments.

For the purposes of applying point 1 of Article 1 of
2.
Directive 2003/6/EC,
it were made
‘information which,
public, would be likely to have a significant effect on the prices
of financial instruments or related derivative financial instru-
ments’ shall mean information a reasonable investor would be
likely to use as part of the basis of his investment decisions.

if

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Article 2

Means and time-limits for public disclosure of

inside

information

For the purposes of applying Article 6(1) of Directive
1.
2003/6/EC, Articles 102(1) and Article 103 of Directive 2001/
34/EC of the European Parliament and of the Council (1) shall
apply.

Furthermore, Member States shall ensure that the inside infor-
mation is made public by the issuer in a manner which enables
fast access and complete, correct and timely assessment of the
information by the public.

In addition, Member States shall ensure that the issuer does not
combine, in a manner likely to be misleading, the provision of
inside information to the public with the marketing of its activ-
ities.

2. Member States shall ensure that issuers are deemed to
have complied with the first subparagraph of Article 6(1) of
Directive 2003/6/EC where, upon the coming into existence of
a set of circumstances or the occurrence of an event, albeit not
yet formalised, the issuers have promptly informed the public
thereof.

3.
Any significant changes concerning already publicly
information shall be publicly disclosed
disclosed inside
promptly after these changes occur, through the same channel
as the one used for public disclosure of the original informa-
tion.

4. Member States shall require issuers to take reasonable
care to ensure that the disclosure of inside information to the
public is synchronised as closely as possible between all cate-
gories of investors in all Member States in which those issuers
have requested or approved the admission to trading of their
financial instruments on a regulated market.

Article 3

Legitimate interests for delaying public disclosure and
confidentiality

For the purposes of applying Article 6(2) of Directive
1.
2003/6/EC, legitimate interests may, in particular, relate to the
following non-exhaustive circumstances:

(a) negotiations in course, or related elements, where the
outcome or normal pattern of those negotiations would be
likely to be affected by public disclosure. In particular, in
the event that the financial viability of the issuer is in grave
and imminent danger, although not within the scope of the
applicable insolvency law, public disclosure of information
may be delayed for a limited period where such a public
disclosure would seriously jeopardise the interest of existing
and potential shareholders by undermining the conclusion
of specific negotiations designed to ensure the long-term
financial recovery of the issuer;

(b) decisions taken or contracts made by the management body
of an issuer which need the approval of another body of
the issuer in order to become effective, where the organisa-

(1) OJ L 184, 6.7.2001, p. 1.

tion of such an issuer requires the separation between these
bodies, provided that a public disclosure of the information
together with the simultaneous
before such approval
announcement that this approval
is still pending would
jeopardise the correct assessment of the information by the
public.

2.
For the purposes of applying Article 6(2) of Directive
2003/6/EC, Member States shall require that,
in order to be
inside information, an
able to ensure the confidentiality of
issuer controls access to such information and, in particular,
that:

(a) the issuer has established effective arrangements to deny
access to such information to persons other than those
who require it for the exercise of their functions within the
issuer;

(b) the issuer has taken the necessary measures to ensure that
any person with access to such information acknowledges
the legal and regulatory duties entailed and is aware of the
sanctions attaching to the misuse or improper circulation
of such information;

(c) the issuer has in place measures which allow immediate
public disclosure in case the issuer was not able to ensure
the confidentiality of
inside information,
without prejudice to the second subparagraph of Article 6
(3) of Directive 2003/6/EC.

the relevant

Article 4

Manipulative behaviour related to false or misleading
signals and to price securing

For the purposes of applying point 2(a) of Article 1 of Directive
2003/6/EC, and without prejudice to the examples set out in
the second paragraph of point 2 thereof, Member States shall
ensure that the following non-exhaustive signals, which should
not necessarily be deemed in themselves to constitute market
manipulation, are taken into account when transactions or
orders to trade are examined by market participants and
competent authorities:

(a) the extent to which orders to trade given or transactions
undertaken represent a significant proportion of the daily
volume of transactions in the relevant financial instrument
on the regulated market concerned,
in particular when
these activities lead to a significant change in the price of
the financial instrument;

(b) the extent to which orders to trade given or transactions
undertaken by persons with a significant buying or selling
position in a financial
lead to significant
changes in the price of the financial instrument or related
derivative or underlying asset admitted to trading on a
regulated market;

instrument

(c) whether transactions undertaken lead to no change in bene-
instrument admitted to

ficial ownership of a financial
trading on a regulated market;

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(d) the extent to which orders to trade given or transactions
undertaken include position reversals in a short period and
represent a significant proportion of the daily volume of
transactions in the relevant
instrument on the
regulated market concerned, and might be associated with
significant changes in the price of a financial instrument
admitted to trading on a regulated market;

financial

(e) the extent to which orders to trade given or transactions
undertaken are concentrated within a short time span in
the trading session and lead to a price change which is
subsequently reversed;

(f) the extent to which orders to trade given change the repre-
sentation of the best bid or offer prices in a financial instru-
ment admitted to trading on a regulated market, or more
generally the representation of the order book available to
market participants, and are removed before they are
executed;

(g) the extent to which orders to trade are given or transac-
tions are undertaken at or around a specific time when
reference prices, settlement prices and valuations are calcu-
lated and lead to price changes which have an effect on
such prices and valuations.

Article 5

Manipulative behaviours related to the employment of
fictitious devices or any other form of deception or
contrivance

For the purposes of applying point 2(b) of Article 1 of Direc-
tive 2003/6/EC, and without prejudice to the examples set out
in the second paragraph of point 2 thereof, Member States shall
ensure that the following non-exhaustive signals, which should
not necessarily be deemed in themselves to constitute market
manipulation, are taken into account when transactions or
orders to trade are examined by market participants and
competent authorities:

(a) whether orders to trade given or transactions undertaken
by persons are preceded or followed by dissemination of
false or misleading information by the same persons or
persons linked to them;

(b) whether orders to trade are given or transactions are under-
taken by persons before or after the same persons or
persons linked to them produce or disseminate research or
investment
erroneous or
recommendations which are
biased or demonstrably influenced by material interest.

Article 6

Transposition

1. Member States shall bring into force the laws, regulations
and administrative provisions necessary to comply with this
Directive by 12 October 2004 at the latest. They shall forth-
with communicate to the Commission the text of the provi-
sions and a correlation table between those provisions and this
Directive.

When Member States adopt those provisions, they shall contain
a reference to this Directive or be accompanied by such a refer-
ence on the occasion of their official publication. Member
States shall determine how such reference is to be made.

2. Member States shall communicate to the Commission the
text of the main provisions of national law which they adopt in
the field covered by this Directive.

Article 7

Entry into force

This Directive shall enter into force on the day of its publica-
tion in the Official Journal of the European Union.

Article 8

Addressees

This Directive is addressed to the Member States.

Done at Brussels, 22 December 2003.

For the Commission

Frederik BOLKESTEIN

Member of the Commission