MAR 1 Annex 1 Provisions of the Buy-back and Stabilisation Regulation relating to buy-back programmes

1.1.1

G

The effect of article 8 of the Market Abuse Directive and section 118A(5)(b) of the Act is that behaviour which conforms with the buy-back provisions in the Buy-back and Stabilisation Regulation will not amount to market abuse.

1.1.2

G

As the Buy-back and Stabilisation Regulation is not directed at the protection of shareholder interests, issuers will also need to consult both the Companies Act 20061and the Part 6 rules for the shareholder protection requirements applying to a proposed buy-back.

1.1.3

EU

Table: Article 3 of the Buy-back and Stabilisation Regulation

Article 3

Objectives of buy-back programmes

In order to benefit from the exemption provided for in Article 8 of [the Market Abuse Directive], 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 obligations arising from any of the following:

(a)

debt financial instruments exchangeable into equity instruments;

(b)

employee share option programmes or other allocations of shares to employees of the issuer or of an associate company.

1.1.4

EU

Table: Relevant Recitals (Article 3) from the Buy-back and Stabilisation Regulation

Recital 3

... the exemptions created by this Regulation 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 [the Market Abuse Directive] and may be the object of administrative measures or sanctions, if the competent authority establishes that the action in question constitutes market abuse.

1.1.5

EU

Table: Article 4 of the Buy-back and Stabilisation Regulation

Article 4

Conditions for buy-back programmes and disclosure

1.

The [buy-back programme] must comply with the conditions laid down by Article 19(1) of [the PLC Safeguards Directive].

2.

Prior to the start of trading, full details of the programme approved in accordance with Article 19(1) of [the PLC Safeguards Directive] 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 consideration, the maximum number of shares to be acquired and the duration of the period for which authorisation for the programme has been given.

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

3.

The issuer must have in place the mechanisms ensuring that it fulfils trade reporting obligations to the competent 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 the [ISD].

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.

1.1.6

G

The information specified in article 20(1) of the ISD is the names and numbers of the instruments bought or sold, the dates and times of the transactions, the transaction prices and means of identifying the investment firms concerned.

1.1.7

G

Article 19(1) of the PLC Safeguards Directive is implemented in Great Britain by section 7011of the Companies Act 20061.

1.1.8

G

The FCA accepts disclosure through a regulatory information service as adequate public disclosure.

1.1.9

EU

Table: Article 5 of the Buy-back and Stabilisation Regulation

Article 5

Conditions for trading

1.

In so far as prices are concerned, the issuer must not, 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 market, in advance, of its intention to deviate from the 25 % limit;

(b)

the issuer [makes an adequate public disclosure of] the fact that it may deviate from the 25 % limit;

(c)

the issuer does not exceed 50 % of the average daily volume.

1.1.10

EU

Table: Relevant recitals (Article 5) from the Buy-back and Stabilisation Regulation

Recital 9

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.

Recital 10

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 disclosure of inside information.

1.1.11

G

Whether a case of extreme low liquidity exists for the purposes of article 5(3) will depend on the circumstance of each case. Issuers and their advisers may wish to approach the FCA and seek further individual guidance on cases that come within article 5(3).

1.1.12

EU

Table: Article 6 of the Buy-back and Stabilisation Regulation

Article 6

Restrictions

1.

In order to benefit from the exemption provided by Article 8 of [the Market Abuse Directive], the issuer shall not, during its participation in a [buy-back programme], engage in the following trading:

(a)

selling of own shares during the life of the programme;

(b)

trading during a period which, under the law of the Member State in which trading takes place, is a closed period;

(c)

trading where the issuer has decided to delay the public disclosure of inside information in accordance with Article 6(2) of [the Market Abuse Directive].

2.

Paragraph 1(a) shall not apply if the issuer is an [investment 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 [investment 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 in place a [time-scheduled buy-back programme]; or

(b)

the buy-back programme is lead-managed by an [investment 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.

1.1.13

G

For the purposes of article 6(1)(b) of the Buy back and Stabilisation Regulation, a close period in the United Kingdom is the period during which purchases or early redemptions by a company of its own securities may not be made under the Part 6 Rules.

1.1.14

G

Article 6(2) of the Market Abuse Directive, referred to in article 6(1)(c) of the Buy-Back and Stabilisation Regulation, is implemented in the United Kingdom by the Disclosure Rules and Transparency Rules.