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 (Text with EEA relevance)
Date: 2003-12-22
Institutions: European Commission
Subjects: capital market, economic stabilisation, financial instrument, investment, share

23.12.2003

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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

(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 the Council of 28 January 2003 on insider dealing
and market manipulation (market abuse) (1), and in particular
Article 8 thereof,

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

Whereas:

(1)

(2)

(3)

(4)

Article 8 of Directive 2003/6/EC provides that the prohi-
bitions provided therein shall not apply to trading in
own shares in ‘buy back’ programmes or to the stabilisa-
tion of a financial instrument, provided such trading is
carried out in accordance with implementing measures
adopted to that effect.

trading in own shares

in ‘buy-back’
Activities of
instru-
programmes and of stabilisation of a financial
ment which would not benefit from the exemption of
the prohibitions of Directive 2003/6/EC as provided for
by Article 8 thereof, should not in themselves be deemed
to constitute market abuse.

On the other hand, the exemptions created by this Regu-
lation only cover behaviour directly related to the
purpose of
the buy-back and stabilisation activities.
Behaviour which is not directly related to the purpose of
the buy-back and stabilisation activities shall therefore
be considered as any other action covered by Directive
2003/6/EC and may be the object of administrative
measures or sanctions, if the competent authority estab-
the action in question constitutes market
lishes that
abuse.

regards

in ‘buy-back’
trading in own shares
As
programmes, the rules provided for by this Regulation
are without prejudice to the application of Council
Directive 77/91/EEC on coordination of
safeguards
which, for the protection of the interests of members
and others, are required by Member States of companies
within the meaning of the second paragraph of Article
58 of the Treaty, in respect of the formation of public

(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).

(5)

(6)

(7)

(8)

(9)

(10)

(11)

limited liability companies and the maintenance and
alteration of their capital, with a view to making such
safeguards equivalent (3).

Allowable ‘buy back’ activities in order to benefit from
the exemption of the prohibitions of Directive 2003/6/
EC include issuers needing the possibility to reduce their
capital, to meet obligations arising from debt financial
instruments exchangeable into equity instruments, and
to meet obligations arising from allocations of shares to
employees.

Transparency is a prerequisite for prevention of market
abuse. To this end Member States may officially appoint
mechanisms to be used for public disclosure of informa-
tion required to be publicly disclosed under this Regu-
lation.

Issuers having adopted ‘buy-back’ programmes
inform their
required, the public.

shall
and, wherever

competent

authority

Trading in own shares in ‘buy-back’ programmes may be
carried out through derivative financial instruments.

In order to prevent market abuse, the daily volume of
trading in own shares in ‘buy-back’ programmes shall be
limited. However, some flexibility is necessary in order
to respond to given market conditions such as a low
level of transactions.

Particular attention has to be paid to the selling of own
shares during the life of a ‘buy-back’ programme, to the
possible existence of closed periods within issuers during
which transactions are prohibited and to the fact that an
issuer may have legitimate reasons to delay public disclo-
sure of inside information.

Stabilisation transactions mainly have the effect of
providing support for the price of an offering of relevant
securities during a limited time period if they come
under selling pressure,
thus alleviating sales pressure
generated by short term investors and maintaining an
orderly market in the relevant securities. This is in the
interest of
subscribed or
purchased those relevant securities in the context of a
significant distribution, and of issuers. In this way, stabi-
lisation can contribute to greater confidence of investors
and issuers in the financial markets.

investors having

those

(3) OJ L 26, 31.1.1977, p. 1.

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(12)

Stabilisation activity may be carried out either on or off
a regulated market and may be carried out by use of
financial instruments other than those admitted or to be
admitted to the regulated market which may influence
the price of the instrument admitted or to be admitted
to trading on a regulated market.

(13)

instruments
Relevant securities shall
that become fungible after an initial period because they
are substantially the same, although they have different
initial dividend or interest payment rights.

include financial

(14)

In relation to stabilisation, block trades shall not be
considered as a significant distribution of relevant securi-
ties as they are strictly private transactions.

(21)

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

HAS ADOPTED THIS REGULATION:

CHAPTER I

DEFINITIONS

Article 1

Subject matter

(15) When Member States permit, in the context of an initial
public offer, trading prior to the beginning of the official
trading on a regulated market, the permission covers
‘when issued trading’.

This Regulation lays down the conditions to be met by buy-
back programmes and the stabilisation of financial instruments
in order to benefit from the exemption provided for in Article
8 of Directive 2003/6/EC.

(16) Market integrity requires the adequate public disclosure
of stabilisation activity by issuers or by entities under-
taking stabilisation, acting or not on behalf of these
issuers. Methods used for adequate public disclosure of
such information should be efficient and can take into
account market practices accepted by competent autho-
rities.

(17)

(18)

There should be adequate coordination in place between
all investment firms and credit institutions undertaking
stabilisation. During stabilisation, one investment firm or
credit institution shall act as a central point of inquiry
competent
for any regulatory intervention by the
authority in each Member State concerned.

In order to avoid confusion of market participants, stabi-
lisation activity should be carried out by taking into
account the market conditions and the offering price of
the relevant security and transactions to liquidate posi-
tions established as a result of stabilisation activity
should be undertaken to minimise market impact having
due regard to prevailing market conditions.

(19) Overallotment

facilities and ‘greenshoe options’ are
closely related to stabilisation, by providing resources
and hedging for stabilisation activity.

(20)

Particular attention should be paid to the exercise of an
overallotment facility by an investment firm or a credit
institution for the purpose of stabilisation when it results
in a position uncovered by the ‘greenshoe option’.

Article 2

Definitions

For the purposes of this Regulation, the following definitions
shall apply in addition to those laid down in Directive 2003/6/
EC:

1.

2.

3.

4.

5.

6.

‘investment firm’ means any legal person as defined in
point (2) of Article 1 of Council Directive 93/22/EEC (1);

institution’ means a legal person as defined in
the European

‘credit
Article 1(1) of Directive 2000/12/EC of
Parliament and the Council (2);

‘buy-back programmes’ means trading in own shares in
accordance with Articles 19 to 24 of Council Directive 77/
91/EEC;

‘time-scheduled “buy-back” programme’ means a ‘buy-back’
programme where the dates and quantities of securities to
be traded during the time period of the programme are set
out at the time of the public disclosure of the ‘buy-back’
programme;

‘adequate public disclosure’ means disclosure made in
accordance with the procedure laid down in Articles
102(1) and 103 of Directive 2001/34/EC of the European
Parliament and of the Council (3);

‘relevant securities’ means transferable securities as defined
in Directive 93/22/EEC, which are admitted to trading on
a regulated market or for which a request for admission to
trading on such a market has been made, and which are
the subject of a significant distribution;

(1) OJ L 141, 11.6.1993, p. 27.
(2) OJ L 126, 26.5.2000, p. 1.
(3) OJ L 184, 6.7.2001, p. 1.

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7.

8.

‘stabilisation’ means any purchase or offer to purchase rele-
vant securities, or any transaction in associated instruments
equivalent thereto, by investment firms or credit institu-
tions, which is undertaken in the context of a significant
distribution of such relevant
securities exclusively for
supporting the market price of these relevant securities for
a predetermined period of time, due to a selling pressure
in such securities;

the following financial
‘associated instruments’ means
instruments (including those which are not admitted to
trading on a regulated market, or for which a request for
admission to trading on such a market has not been made,
provided that
the relevant competent authorities have
agreed to standards of transparency for transactions in
such financial instruments):

(a) contracts or rights to subscribe for, acquire or dispose

of relevant securities;

(b) financial derivatives on relevant securities;

(c) where

relevant

convertible or
securities
the
exchangeable debt
into
instruments,
which such convertible or exchangeable debt instru-
ments may be converted or exchanged;

are
the securities

(d) instruments which are issued or guaranteed by the
issuer or guarantor of the relevant securities and whose
market price is likely to materially influence the price
of the relevant securities, or vice versa;

(e) where the relevant securities are securities equivalent
to shares, the shares represented by those securities
(and any other securities equivalent to those shares).

9.

‘significant distribution’ means an initial or secondary offer
of relevant securities, publicly announced and distinct from
ordinary trading both in terms of the amount in value of
the securities offered and the selling methods employed;

10.

‘offeror’ means the prior holders of, or the entity issuing,
the relevant securities;

11.

‘allotment’ means the process or processes by which the
number of relevant securities to be received by investors
who have previously subscribed or applied for them is
determined;

12.

‘ancillary stabilisation’ means the exercise of an overallot-
ment facility or of a greenshoe option by investment firms
or credit institutions, in the context of a significant distri-
bution of relevant securities, exclusively for facilitating
stabilisation activity;

13.

‘overallotment facility’ means a clause in the underwriting
agreement or lead management agreement which permits
acceptance of subscriptions or offers to purchase a greater
number of relevant securities than originally offered;

tion(s) may purchase up to a certain amount of relevant
securities at the offer price for a certain period of time
after the offer of the relevant securities.

CHAPTER II

‘BUY-BACK’ PROGRAMMES

Article 3

Objectives of buy-back programmes

In order to benefit from the exemption provided for in Article
8 of Directive 2003/6/EC, a buy-back programme must comply
with Articles 4, 5 and 6 of this Regulation and the sole purpose
of that buy-back programme must be to reduce the capital of
an issuer (in value or in number of shares) or to meet obliga-
tions arising from any of the following:

(a) debt financial instruments exchangeable into equity instru-

ments;

(b) employee share option programmes or other allocations of
the issuer or of an associate

shares to employees of
company.

Article 4

Conditions for ‘buy-back’ programmes and disclosure

The ‘buy-back’ programme must comply with the condi-

1.
tions laid down by Article 19(1) of Directive 77/91/EEC.

2.
Prior to the start of trading, full details of the programme
approved in accordance with Article 19(1) of Directive 77/91/
EEC must be adequately disclosed to the public in Member
States in which an issuer has requested admission of its shares
to trading on a regulated market.

Those details must include the objective of the programme as
referred to in Article 3,
the
maximum number of shares to be acquired and the duration of
the period for which authorisation for the programme has been
given.

the maximum consideration,

Subsequent changes to the programme must be subject
adequate public disclosure in Member States.

to

The issuer must have in place the mechanisms ensuring
3.
that
fulfils trade reporting obligations to the competent
it
authority of the regulated market on which the shares have
been admitted to trading. These mechanisms must record each
transaction related to ‘buy-back’ programmes,
including the
information specified in Article 20(1) of Directive 93/22/EEC.

14.

‘greenshoe option’ means an option granted by the offeror
in favour of the investment firm(s) or credit institution(s)
involved in the offer for the purpose of covering overallot-
ments, under the terms of which such firm(s) or institu-

4.
The issuer must publicly disclose details of all transactions
as referred to in paragraph 3 no later than the end of the
seventh daily market session following the date of execution of
such transactions.

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Article 5

Conditions for trading

In so far as prices are concerned, the issuer must not,
1.
when executing trades under a ‘buy-back’ programme, purchase
shares at a price higher than the higher of the price of the last
independent trade and the highest current independent bid on
the trading venues where the purchase is carried out.

If the trading venue is not a regulated market, the price of the
last independent trade or the highest current independent bid
taken in reference shall be the one of the regulated market of
the Member State in which the purchase is carried out.

Where the issuer carries out
the purchase of own shares
through derivative financial instruments, the exercise price of
those derivative financial
instruments shall not be above the
higher of the price of the last independent trade and the highest
current independent bid.

2.
In so far as volume is concerned, the issuer must not
purchase more than 25 % of the average daily volume of the
shares in any one day on the regulated market on which the
purchase is carried out.

The average daily volume figure must be based on the average
daily volume traded in the month preceding the month of
public disclosure of that programme and fixed on that basis for
the authorised period of the programme.

Where the programme makes no reference to that volume, the
average daily volume figure must be based on the average daily
volume traded in the 20 trading days preceding the date of
purchase.

3.
For the purposes of paragraph 2, in cases of extreme low
liquidity on the relevant market, the issuer may exceed the
25 % limit, provided that the following conditions are met:

(a) the issuer informs the competent authority of the relevant
in advance, of its intention to deviate from the

market,
25 % limit;

(b) the issuer discloses adequately to the public the fact that it

may deviate from the 25 % limit;

(c) the issuer does not exceed 50 % of

the average daily

volume.

Article 6

Restrictions

In order to benefit

1.
from the exemption provided by
Article 8 of Directive 2003/6/EC, the issuer shall not, during its
participation in a buy-back programme,
in the
following trading:

engage

(a) selling of own shares during the life of the programme;

(b) trading during a period which, under the law of

Member State in which trading takes place,
period;

the
is a closed

(c) trading where the issuer has decided to delay the public
disclosure of inside information in accordance with Article
6(2) of Directive 2003/6/EC.

2.
Paragraph 1(a) shall not apply if the issuer is an invest-
ment firm or credit institution and has established effective
information barriers (Chinese Walls) subject to supervision by
the competent authority, between those responsible for the
handling of inside information related directly or indirectly to
the issuer and those responsible for any decision relating to the
trading of own shares (including the trading of own shares on
behalf of clients), when trading in own shares on the basis of
such any decision.

Paragraphs 1(b) and (c) shall not apply if the issuer is an invest-
ment firm or credit institution and has established effective
information barriers (Chinese Walls) subject to supervision by
the competent authority, between those responsible for the
handling of inside information related directly or indirectly to
the issuer (including trading decisions under the ‘buy-back’
programme) and those responsible for the trading of own
shares on behalf of clients, when trading in own shares on
behalf of those clients.

3.

Paragraph 1 shall not apply if:

(a) the

issuer has
programme; or

in place

a

time-scheduled ‘buy-back’

(b) the ‘buy-back’ programme is lead-managed by an invest-
ment firm or a credit institution which makes its trading
decisions in relation to the issuer's shares independently of,
and without influence by, the issuer with regard to the
timing of the purchases.

CHAPTER III

STABILISATION OF A FINANCIAL INSTRUMENT

Article 7

Conditions for stabilisation

In order to benefit from the exemption provided for in Article
8 of Directive 2003/6/EC, stabilisation of a financial instrument
must be carried out in accordance with Articles 8, 9 and 10 of
this Regulation.

Article 8

Time-related conditions for stabilisation

Stabilisation shall be carried out only for a limited time

1.
period.

2.
In respect of shares and other securities equivalent to
shares, the time period referred to in paragraph 1 shall, in the
case of an initial offer publicly announced, start on the date of
commencement of trading of the relevant securities on the
regulated market and end no later than 30 calendar days there-
after.

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Where the initial offer publicly announced takes place in a
Member State that permits trading prior to the commencement
of trading on a regulated market, the time period referred to in
paragraph 1 shall start on the date of adequate public disclo-
sure of the final price of the relevant securities and end no later
than 30 calendar days thereafter, provided that any such
trading is carried out in compliance with the rules, if any, of
the regulated market on which the relevant securities are to be
admitted to trading,
including any rules concerning public
disclosure and trade reporting.

3.
In respect of shares and other securities equivalent to
shares, the time period referred to in paragraph 1 shall, in the
case of a secondary offer, start on the date of adequate public
disclosure of the final price of the relevant securities and end
no later than 30 calendar days after the date of allotment.

In respect of bonds and other forms of securitised debt
4.
(which are not convertible or exchangeable into shares or into
other securities equivalent to shares), the time period referred
to in paragraph 1 shall start on the date of adequate public
disclosure of the terms of the offer of the relevant securities
(i.e. including the spread to the benchmark, if any, once it has
been fixed) and end, whatever is earlier, either no later than 30
calendar days after the date on which the issuer of the instru-
ments received the proceeds of the issue, or no later than 60
calendar days after the date of allotment of the relevant securi-
ties.

5.
In respect of securitised debt convertible or exchangeable
into shares or into other securities equivalent to shares, the
time period referred to in paragraph 1 shall start on the date of
adequate public disclosure of the final terms of the offer of the
relevant securities and end, whatever is earlier, either no later
than 30 calendar days after the date on which the issuer of the
instruments received the proceeds of the issue, or no later than
60 calendar days after the date of allotment of the relevant
securities.

Article 9

Disclosure and reporting conditions for stabilisation

1.
The following information shall be adequately publicly
disclosed by issuers, offerors, or entities undertaking the stabili-
sation acting, or not, on behalf of such persons, before the
opening of the offer period of the relevant securities:

(a) the fact that stabilisation may be undertaken, that there is
no assurance that it will be undertaken and that it may be
stopped at any time;

(b) the fact that stabilisation transactions are aimed to support

the market price of the relevant securities;

(d) the identity of the stabilisation manager, unless this is not
known at the time of publication in which case it must be
publicly disclosed before any stabilisation activity begins;

(e) the existence and maximum size of any overallotment
facility or greenshoe option, the exercise period of the
greenshoe option and any conditions for the use of the
overallotment facility or exercise of the greenshoe option.

The application of the provisions of this paragraph shall be
suspended for offers under the scope of application of the
measures
implementing Directive 2004/…/EC (prospectus
Directive), from the date of application of these measures.

2. Without prejudice to Article 12(1)(c) of Directive 2003/6/
EC, the details of all stabilisation transactions must be notified
by issuers, offerors, or entities undertaking the stabilisation
acting, or not, on behalf of such persons, to the competent
authority of the relevant market no later than the end of the
seventh daily market session following the date of execution of
such transactions.

3. Within one week of the end of the stabilisation period,
the following information must be adequately disclosed to the
public by issuers, offerors, or entities undertaking the stabilisa-
tion acting, or not, on behalf of such persons:

(a) whether or not stabilisation was undertaken;

(b) the date at which stabilisation started;

(c) the date at which stabilisation last occurred;

(d) the price range within which stabilisation was carried out,
for each of the dates during which stabilisation transactions
were carried out.

4.
Issuers, offerors, or entities undertaking the stabilisation,
acting or not, on behalf of such persons, must record each
stabilisation order or transaction with, as a minimum,
the
information specified in Article 20(1) of Directive 93/22/EEC
extended to financial instruments other than those admitted or
going to be admitted to the regulated market.

investment

firms or credit

5. Where several
institutions
undertake the stabilisation acting, or not, on behalf of the
issuer or offeror, one of those persons shall act as central point
of inquiry for any request from the competent authority of the
regulated market on which the relevant securities have been
admitted to trading.

Article 10

Specific price conditions

(c) the beginning and end of the period during which stabilisa-

tion may occur;

1.
In the case of an offer of shares or other securities equiva-
lent to shares, stabilisation of the relevant securities shall not in
any circumstances be executed above the offering price.

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In the case of an offer of securitised debt convertible or
2.
exchangeable into instruments as referred to in paragraph 1,
stabilisation of those instruments shall not in any circumstances
be executed above the market price of those instruments at the
time of the public disclosure of the final terms of the new
offer.

Article 11

Conditions for ancillary stabilisation

In order to benefit from the exemption provided for in Article
8 of Directive 2003/6/EC, ancillary stabilisation must be under-
taken in accordance with Article 9 of this Regulation and with
the following:

(a) relevant securities may be overallotted only during the

subscription period and at the offer price;

(b) a position resulting from the exercise of an overallotment
facility by an investment firm or credit institution which is
not covered by the greenshoe option may not exceed 5 %
of the original offer;

(c) the greenshoe option may be exercised by the beneficiaries
of such an option only where relevant securities have been
overallotted;

(d) the greenshoe option may not amount to more than 15 %

of the original offer;

(e) the exercise period of the greenshoe option must be the
same as the stabilisation period required under Article 8;

(f) the exercise of the greenshoe option must be disclosed to
the public promptly, together with all appropriate details,
including in particular the date of exercise and the number
and nature of relevant securities involved.

CHAPTER IV

FINAL PROVISION

Article 12

Entry into force

This Regulation shall enter into force in Member States on the
day of its publication in the Official
the European
Union.

Journal of

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at Brussels, 22 December 2003.

For the Commission

Frederik BOLKESTEIN

Member of the Commission