Commission Directive 2003/125/EC of 22 December 2003 implementing Directive 2003/6/EC of the European Parliament and of the Council as regards the fair presentation of investment recommendations and the disclosure of conflicts of interest (Text with EEA relevance)
Date: 2003-12-22
Institutions: European Commission
Subjects: capital market, exchange of information, financial instrument, investment

24.12.2003

EN

Official Journal of the European Union

L 339/73

COMMISSION DIRECTIVE 2003/125/EC

of 22 December 2003

implementing Directive 2003/6/EC of the European Parliament and of the Council as regards the
fair presentation of investment recommendations and the disclosure of conflicts of interest

(Text with EEA relevance)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Com-
munity,

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 sixth indent of Article 6(10) thereof,

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

Whereas:

Harmonised standards are necessary for the fair, clear
and accurate presentation of information and disclosure
of interests and conflicts of interest, to be complied with
by persons producing or disseminating information
recommending or suggesting an investment strategy,
intended for distribution channels or for the public. In
particular, market integrity requires high standards of
fairness, probity and transparency when information
recommending or suggesting an investment strategy is
presented.

Recommending or suggesting an investment strategy is
either done explicitly (such as ‘buy’, ‘hold’ or ‘sell’ recom-
mendations) or implicitly (by reference to a price target
or otherwise).

informal short-term investment

Investment advice, through the provision of a personal
recommendation to a client in respect of one or more
transactions relating to financial instruments (in particu-
lar
recommendations
originating from inside the sales or trading departments
of an investment firm or a credit institution expressed to
their clients), which are not likely to become publicly
available, should not be considered in themselves as
recommendations within the meaning of this Directive.

(6)

(7)

(8)

(9)

Recommendations should be presented clearly and accu-
rately.

Own interests or conflicts of interest of persons recom-
mending or suggesting investment strategy may influ-
ence the opinion that they express in investment recom-
mendations. In order to ensure that the objectivity and
reliability of the information can be evaluated, appro-
priate disclosure should be made of significant financial
interests in any financial instrument which is the subject
of the information recommending investment strategies,
or of any conflicts of interest or control relationship
with respect to the issuer to whom the information
this Directive
relates, directly or indirectly. However,
should not require relevant persons producing invest-
ment recommendations to breach effective information
barriers put
in place in order to prevent and avoid
conflicts of interest.

Investment recommendations may be disseminated in
unaltered, altered or summarised form by a person other
than the producer. The way in which disseminators
handle such recommendations may have an important
impact on the evaluation of those recommendations by
investors. In particular, the knowledge of the identity of
investment recommendations, his
the disseminator of
conduct of business rules or the extent of alteration of
the original recommendation can be a valuable piece of
information for investors when considering their invest-
ment decisions.

Posting of investment recommendations on internet sites
should be in accordance with the rules on transfer of
personal data to third countries as laid down in Directive
95/46/EC of the European Parliament and of the Council
of 24 October 1995 on the protection of individuals
with regard to the processing of personal data and on
the movement of such data (3).

Investment recommendations that constitute a possible
basis for investment decisions should be produced and
disseminated in accordance with high standards of care
in order to avoid misleading market participants.

(10)

The identity of the producer of investment recommenda-
tions, his conduct of business rules and the identity of
his competent authority should be disclosed, since it
may be a valuable piece of information for investors to
consider in relation to their investment decisions.

Credit rating agencies issue opinions on the credit-
worthiness of a particular issuer or financial instrument
as of a given date. As such, these opinions do not consti-
this
tute a recommendation within the meaning of
Directive. However,
should
credit
consider adopting internal policies and procedures
designed to ensure that credit ratings published by them
are fairly presented and that they appropriately disclose
any
interest
conflicts of
concerning the financial
instruments or the issuers to
which their credit ratings relate.

interests or

significant

agencies

rating

(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).

(3) OJ L 281, 23.11.1995, p. 31.

(1)

(2)

(3)

(4)

(5)

L 339/74

EN

Official Journal of the European Union

24.12.2003

(11)

the fundamental

rights and
This Directive respects
observes the principles recognised in particular by the
Charter of Fundamental Rights of the European Union
and in particular by Article 11 thereof and Article 10 of
the European Convention on Human Rights.
In this
in any way prevent
regard,
Member States from applying their constitutional rules
relating to freedom of the press and freedom of expres-
sion in the media.

this Directive does not

(12)

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

HAS ADOPTED THIS DIRECTIVE:

CHAPTER I

DEFINITIONS

Article 1

Definitions

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

1.

2.

3.

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

‘credit institution’ means any person as defined in Article
1(1) of Directive 2000/12/EC of the European Parliament
and of the Council (2);

research or other

‘recommendation’ means
information
recommending or suggesting an investment strategy, expli-
citly or implicitly, concerning one or several financial instru-
ments or the issuers of financial instruments, including any
opinion as to the present or future value or price of such
instruments,
intended for distribution channels or for the
public;

4.

‘research or other information recommending or suggesting
investment strategy’ means:

(a) information produced by an independent analyst, an
investment firm, a credit institution, any other person
whose main business is to produce recommendations or
a natural person working for them under a contract of
employment or otherwise, that, directly or indirectly,
expresses a particular investment recommendation in
respect of a financial instrument or an issuer of financial
instruments;

(b) information produced by persons other than the persons
referred to in (a) which directly recommends a particular
investment decision in respect of a financial instrument;

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

5.

6.

7.

‘relevant person’ means a natural or legal person producing
or disseminating recommendations in the exercise of his
profession or the conduct of his business;

‘issuer’ means the issuer of a financial instrument to which a
recommendation relates, directly or indirectly;

‘distribution channels’ shall mean a channel through which
information is, or is likely to become, publicly available.
‘Likely to become publicly available information’ shall mean
information to which a large number of persons have
access;

8.

‘appropriate regulation’ shall mean any regulation, including
self-regulation, in place in Member States as referred to by
Directive 2003/6/EC.

CHAPTER II

PRODUCTION OF RECOMMENDATIONS

Article 2

Identity of producers of recommendations

1. Member States shall ensure that there is appropriate regu-
lation in place to ensure that any recommendation discloses
clearly and prominently the identity of the person responsible
for its production, in particular, the name and job title of the
individual who prepared the recommendation and the name of
the legal person responsible for its production.

2. Where the relevant person is an investment firm or a
credit institution, Member States shall require that the identity
of the relevant competent authority be disclosed.

Where the relevant person is neither an investment firm nor a
credit institution, but is subject to self-regulatory standards or
codes of conduct, Member States shall ensure that a reference
to those standards or codes is disclosed.

3. Member States shall ensure that there is appropriate regu-
lation in place to ensure that the requirements laid down in
paragraphs 1 and 2 are adapted in order not to be dispropor-
tionate in the case of non-written recommendations. Such
adaptation may include a reference to the place where such
disclosures can be directly and easily accessed by the public,
such as an appropriate internet site of the relevant person.

Paragraphs 1 and 2 shall not apply to journalists subject
4.
to equivalent appropriate
including equivalent
regulation,
appropriate self regulation, in the Member States, provided that
such regulation achieves similar effects as those of paragraphs
1 and 2.

Article 3

General standard for fair presentation of recommenda-
tions

1. Member States shall ensure that there is appropriate regu-
lation in place to ensure that all relevant persons take reason-
able care to ensure that:

(a) facts are clearly distinguished from interpretations, esti-
mates, opinions and other types of non-factual information;

24.12.2003

EN

Official Journal of the European Union

L 339/75

(b) all sources are reliable or, where there is any doubt as to

whether a source is reliable, this is clearly indicated;

(c) all projections,

forecasts and price targets are clearly
labelled as such and that the material assumptions made in
producing or using them are indicated.

(f) where a recommendation differs from a recommendation
concerning the same financial instrument or issuer, issued
during the 12-month period immediately preceding its
release, this change and the date of the earlier recommen-
dation are indicated clearly and prominently.

2. Member States shall ensure that there is appropriate regu-
lation in place to ensure that the requirements laid down in
paragraph 1 are adapted in order not to be disproportionate in
the case of non-written recommendations.

3. Member States shall require that all relevant persons take
reasonable care to ensure that any recommendation can be
substantiated as reasonable, upon request by the competent
authorities.

2. Member States shall ensure that, where the requirements
laid down in points (a), (b) or (c) of paragraph 1 would be
disproportionate in relation to the length of the recommenda-
tion distributed, it shall suffice to make clear and prominent
reference in the recommendation itself to the place where the
required information can be directly and easily accessed by the
public, such as a direct Internet link to that information on an
appropriate internet site of the relevant person, provided that
there has been no change in the methodology or basis of valua-
tion used.

Paragraphs 1 and 3 shall not apply to journalists subject
4.
to equivalent appropriate regulation in the Member States,
including equivalent appropriate self regulation, provided that
such regulation achieves similar effects as those of paragraphs
1 and 3.

3. Member States shall ensure that there is appropriate regu-
lation in place to ensure that, in the case of non-written recom-
mendations, the requirements of paragraph 1 are adapted so
that they are not disproportionate.

Article 4

Article 5

Additional obligations in relation to fair presentation of
recommendations

In addition to the obligations laid down in Article 3,
1.
where the relevant person is an independent analyst, an invest-
ment firm, a credit institution, any related legal person, any
other relevant person whose main business is to produce
recommendations, or a natural person working for them under
a contract of employment or otherwise, Member States shall
ensure that there is appropriate regulation in place to ensure
that person to take reasonable care to ensure that at least:

(a) all substantially material sources are indicated, as appro-
priate, including the relevant issuer, together with the fact
whether the recommendation has been disclosed to that
issuer and amended following this disclosure before its
dissemination;

(b) any basis of valuation or methodology used to evaluate a
financial instrument or an issuer of a financial instrument,
or to set a price target
is
adequately summarised;

for a financial

instrument,

(c) the meaning of any recommendation made, such as buy,
sell or hold, which may include the time horizon of the
investment
is
adequately explained and any appropriate risk warning,
including a sensitivity analysis of the relevant assumptions,
indicated;

recommendation relates,

to which the

(d) reference is made to the planned frequency,

if any, of
updates of the recommendation and to any major changes
in the coverage policy previously announced;

(e) the date at which the recommendation was first released
for distribution is indicated clearly and prominently, as well
as the relevant date and time for any financial instrument
price mentioned;

General standard for disclosure of interests and conflicts
of interest

1. Member States shall ensure that there is appropriate regu-
lation in place to ensure that relevant persons disclose all rela-
tionships and circumstances that may reasonably be expected
to impair the objectivity of the recommendation, in particular
where relevant persons have a significant financial interest in
one or more of the financial instruments which are the subject
of the recommendation, or a significant conflict of interest with
respect to an issuer to which the recommendation relates.

Where the relevant person is a legal person, that requirement
shall apply also to any legal or natural person working for it,
under a contract of employment or otherwise, who was
involved in preparing the recommendation.

2. Where the relevant person is a legal person, the informa-
tion to be disclosed in accordance with paragraph 1 shall at
least include the following:

(a) any interests or conflicts of interest of the relevant person
or of related legal persons that are accessible or reasonably
expected to be accessible to the persons involved in the
preparation of the recommendation;

(b) any interests or conflicts of interest of the relevant person
or of related legal persons known to persons who, although
not involved in the preparation of the recommendation,
had or could reasonably be expected to have access to the
recommendation prior to its dissemination to customers or
the public.

L 339/76

EN

Official Journal of the European Union

24.12.2003

3. Member States shall ensure that there is appropriate regu-
lation in place to ensure that the recommendation itself shall
include the disclosures provided for in paragraphs 1 and 2.
Where such disclosures would be disproportionate in relation
to the length of the recommendation distributed, it shall suffice
to make clear and prominent reference in the recommendation
itself to the place where such disclosures can be directly and
easily accessed by the public, such as a direct Internet link to
the disclosure on an appropriate internet site of the relevant
person.

4. Member States shall ensure that there is appropriate regu-
lation in place to ensure that the requirements laid down in
paragraph 1 are adapted in order not to be disproportionate in
the case of non-written recommendations.

5.
Paragraphs 1 to 3 shall not apply to journalists subject to
equivalent appropriate regulation, including equivalent appro-
priate self regulation, in the Member States, provided that such
regulation achieves similar effects as those of paragraphs 1 to
3.

Article 6

Additional obligations in relation to disclosure of interests
or conflicts of interest

shall

States

require

In addition to the obligations laid down in Article 5,
1.
Member
recommendation
produced by an independent analyst, an investment firm, a
credit institution, any related legal person, or any other relevant
person whose main business is to produce recommendations,
discloses clearly and prominently the following information on
their interests and conflicts of interest:

that

any

(a) major shareholdings that exist between the relevant person
or any related legal person on the one hand and the issuer
on the other hand. These major shareholdings include at
least the following instances:

— when shareholdings exceeding 5 % of the total issued
in the issuer are held by the relevant

share capital
person or any related legal person, or

— when shareholdings exceeding 5 % of the total issued
share capital of the relevant person or any related legal
person are held by the issuer.

Member States may provide for lower thresholds than the
5 % threshold as provided for in these two instances;

(b) other significant

financial

interests held by the relevant

person or any related legal person in relation to the issuer;

(c) where applicable, a statement that the relevant person or
any related legal person is a market maker or liquidity
provider in the financial instruments of the issuer;

(e) where applicable, a statement that the relevant person or
any related legal person is party to any other agreement
with the issuer relating to the provision of
investment
banking services, provided that this would not entail the
disclosure of any confidential commercial information and
that the agreement has been in effect over the previous 12
months or has given rise during the same period to the
payment of a compensation or to the promise to get a
compensation paid;

(f) where applicable, a statement that the relevant person or
any related legal person is party to an agreement with the
issuer relating to the production of the recommendation.

2. Member States shall require disclosure, in general terms,
of the effective organisational and administrative arrangements
set up within the investment firm or the credit institution for
the prevention and avoidance of conflicts of
interest with
respect to recommendations, including information barriers.

3. Member States shall require that
for natural or legal
persons working for an investment firm or a credit institution,
under a contract of employment or otherwise, and who were
involved in preparing the recommendation, the requirement
under the second subparagraph of paragraph 1 of Article 5
shall include, in particular, disclosure of whether the remunera-
tion of such persons is tied to investment banking transactions
performed by the investment firm or credit institution or any
related legal person.

Where those natural persons receive or purchase the shares of
the issuers prior to a public offering of such shares, the price at
which the shares were acquired and the date of acquisition shall
also be disclosed.

4. Member States shall require that investment firms and
credit institutions disclose, on a quarterly basis, the proportion
of all recommendations that are ‘buy’, ‘hold’, ‘sell’ or equivalent
terms, as well as the proportion of issuers corresponding to
each of these categories to which the investment firm or the
investment banking
credit
services over the previous 12 months.

institution has supplied material

the recommendation
5. Member States shall ensure that
itself includes the disclosures required by paragraphs 1 to 4.
Where the requirements under paragraphs 1 to 4 would be
disproportionate in relation to the length of the recommenda-
tion distributed, it shall suffice to make clear and prominent
reference in the recommendation itself to the place where such
disclosure can be directly and easily accessed by the public,
such as a direct Internet link to the disclosure on an appro-
priate internet site of the investment firm or credit institution.

(d) where applicable, a statement that the relevant person or
any related legal person has been lead manager or co-lead
manager over the previous 12 months of any publicly
disclosed offer of financial instruments of the issuer;

6. Member States shall ensure that there is appropriate regu-
lation in place to ensure that, in the case of non-written recom-
mendations, the requirements of paragraph 1 are adapted so
that they are not disproportionate.

24.12.2003

EN

Official Journal of the European Union

L 339/77

CHAPTER III

DISSEMINATION OF RECOMMENDATIONS PRODUCED BY
THIRD PARTIES

Article 7

Identity of disseminators of recommendations

Member States shall ensure that there is appropriate regulation
in place to ensure that, whenever a relevant person under his
own responsibility disseminates a recommendation produced
by a third party, the recommendation indicates clearly and
prominently the identity of that relevant person.

Article 8

General standard for dissemination of recommendations

Member States shall ensure that there is appropriate regulation
in place to ensure that whenever a recommendation produced
by a third party is substantially altered within disseminated
information, that information clearly indicates the substantial
alteration in detail. Member States shall ensure that whenever
the substantial alteration consists of a change of the direction
of the recommendation (such as changing a ‘buy’ recommenda-
tion into a ‘hold’ or ‘sell’ recommendation or vice versa), the
requirements laid down in Articles 2 to 5 on producers are met
by the disseminator, to the extent of the substantial alteration.

In addition, Member States shall ensure that there is appro-
priate regulation in place to ensure that relevant legal persons
who themselves, or through natural persons, disseminate a
substantially altered recommendation have a formal written
policy so that the persons receiving the information may be
directed to where they can have access to the identity of the
producer of the recommendation, the recommendation itself
and the disclosure of the producer's interests or conflicts of
interest, provided that these elements are publicly available.

The first and second paragraphs do not apply to news
reporting on recommendations produced by a third party
where the substance of the recommendation is not altered.

In case of dissemination of a summary of a recommendation
produced by a third party, the relevant persons disseminating
such summary shall ensure that the summary is clear and not
misleading, mentioning the source document and where the
disclosures related to the source document can be directly and
easily accessed by the public provided that they are publicly
available.

Article 9

Additional obligations for investment firms and credit
institutions

In addition to the obligations laid down in Articles 7 and 8,
whenever the relevant person is an investment firm, a credit
institution or a natural person working for such persons under

a contract of employment or otherwise, and disseminates
recommendations produced by a third party, Member States
shall require that:

(a) the name of the competent authority of the investment
firm or credit institution is clearly and prominently indi-
cated;

(b) if the producer of the recommendation has not already
disseminated it through a distribution channel, the require-
ments laid down in Article 6 on producers are met by the
disseminator;

(c) if the investment firm or credit institution has substantially
altered the recommendation, the requirements laid down in
Articles 2 to 6 on producers are met.

CHAPTER IV

FINAL PROVISIONS

Article 10

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 those provi-
sions and a correlation table between these 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 11

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 12

Addressees

This Directive is addressed to the Member States.

Done at Brussels, 22 December 2003.

For the Commission

Frederik BOLKESTEIN

Member of the Commission