MKT 6. MKT 6. MARKET ABUSE, PRICE STABILISATION AND BUY-BACK PROGRAMMES
MKT 6.1 MKT 6.1 Market Abuse
Application of the Rules of Market Conduct
MKT 6.1.1 MKT 6.1.1(1) The Rules of Market Conduct ("RMC") is issued as Guidance to the Market Abuse provisions in Part 8 of the FSMR.(2) The RMC applies to Persons in respect of conduct that occurs in the ADGM or in relation to investments admitted to trading on a Prescribed Market situated or operating in the ADGM.
Guidance1. The RMC is intended to prevent Market Abuse by providing further clarity about what activities the Regulator might regard as constituting Market Abuse under the FSMR.2. The RMC applies to persons to whom Part 8 of the FSMR applies, that is, it applies to persons generally whether individuals or bodies corporate and whether or not regulated.3. Examples in the RMC are not intended to be exhaustive. There may be other circumstances in which conduct may contravene the Market Abuse provisions.
MKT 6.2 MKT 6.2 Price Stabilisation and Buy-back Programmes
MKT 6.2.1 Subject matter
The remainder of this chapter sets out the conditions to be met by Buy-back Programmes and the Stabilisation of Financial Instruments in order to benefit from the exemption to Market Abuse provided for in Part 8 of the FSMR.
MKT 6.2.2 Definitions
For the purposes of this chapter, the following definitions shall apply:(a) "Adequate Public Disclosure" means disclosure by advertisement in a newspaper having an appropriate circulation in ADGM;(b) "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;(c) "Ancillary Stabilisation" means the exercise of an Overallotment Facility or of a Greenshoe Option by Reporting Entities, in the context of a Significant Distribution of Relevant Securities, exclusively for facilitation Stabilisation activity;(d) "Associated Instruments" means the following Financial Instruments (including those which are not admitted to trading on a Recognised Investment Exchange, or for which a request for admission to trading on such a Recognised Investment Exchange has not been made, provided that the Regulator has agreed to standards of transparency for transactions in such Financial Instruments):(i) contracts or rights to subscribe for, acquire or dispose of Relevant Securities;(ii) financial derivatives of Relevant Securities;(iii) where the Relevant Securities are convertible or exchangeable debt Instruments, the Securities into which such convertible or exchangeable debt Instruments may be converted or exchanged;(iv) 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; and(v) where the Relevant Securities are Securities equivalent to Shares, the Shares represented by those Securities (and any other Securities equivalent to those Shares);(e) "Buy-back Programmes" means trading in own Shares in accordance with the Companies Regulations 2015;(f) "Greenshoe Option" means an option granted by the Offeror in favour of the Reporting Entity involved in the Offer for the purpose of covering overallotments, under the terms of which such firm(s) or institution(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;(g) "Offeror" means the prior holders of, or the entity issuing, the Relevant Securities;(h) "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;(i) "Relevant Securities" means:(i) Shares in Companies and other Securities equivalent to Shares in Companies;(ii) bonds and other forms of securitised debt, which are negotiable on the capital market; and(iii) any other Securities normally dealt in giving the right to acquire any such Securities by subscription or exchange or giving rise to a cash settlement,excluding Instruments of payment, provided that such Instruments in (i), (ii), or (iii) are admitted to trading on a Recognised Investment Exchange or for which a request for admission to trading on such a Recognised Investment Exchange has been made, and which are the subject of a Significant Distribution;(j) "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;(k) "Stabilisation" means any purchase or Offer to purchase Relevant Securities, or any transaction in Associated Instruments equivalent thereto, by Reporting Entities, 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; and(l) "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.
MKT 6.2.3 Objectives of Buy-back Programmes
In order to benefit from the exemption provided for in the Regulations, a Buy-back Programme must comply with Rules 6.2.4, 6.2.5 and 6.2.6 of this chapter 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 either of the following:(1) Debt Financial Instruments exchangeable into equity Instruments; and(2) Employee Share option programmes or other allocations of Shares to Employees of the Issuer or of an associate Company.
MKT 6.2.4 Conditions for Buy-back Programmes and disclosure(1) The Buy-back Programme must comply with the following conditions:(a) authorisation shall be given by the general meeting, which shall determine the terms and conditions of such acquisitions, and in particular the maximum number of Shares to be acquired, the duration of the period for which the authorisation is given and which may not exceed 18 months, and, in the case of an acquisition for value, the maximum and minimum consideration. Members of the administrative or management body shall be required to satisfy themselves that at the time when each authorised acquisition is effected the conditions referred to in subparagraphs (a), (b) and (c) are respected;(b) the nominal value or, in the absence thereof, the accountable par of the acquired Shares, including Shares previously acquired by the Company and held by it, and Shares acquired by a person acting in his own name but on the Company's behalf, may not exceed 10% of the subscribed capital;(c) the acquisitions may not have the effect of reducing the net assets below an amount when on the closing date of the last financial year the net assets as set out in the Company's annual accounts are, or following such a distribution would become, lower than the amount of the subscribed capital plus those reserves which may not be distributed under applicable enactments or the statutes of the Company; and(d) only fully paid-up Shares may be included in the transaction.(2) Prior to the start of trading, full details of the programme must be adequately disclosed to the public. Those details must include the objective of the programme, 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.(3) The Issuer must have in place the mechanisms ensuring that it fulfils trade reporting obligations the Regulator. These mechanisms must record each transaction related to Buy-back Programmes.(4) The Issuer must publicly disclose details of all transactions as referred to in paragraph (3) no later than the end of the seventh Business Day following the date of execution of such transactions.
MKT 6.2.5 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.(2) If the trading venue is not a Recognised Investment Exchange, the price of the last independent trade or the highest current independent bid taken in reference shall be the one of the Recognised Investment Exchange.(3) 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.(4) 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 Recognised Investment Exchange on which the purchase is carried out.(5) 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.(6) 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.(7) For the purposes of paragraph (3), in cases of extreme low liquidity on the relevant Recognised Investment Exchange, the Issuer may exceed the 25% limit, provided that the following conditions are met:(a) the Issuer informs the Regulator, in advance, of its intention to deviate from the 25% limit;(b) the Issuer discloses adequately to the public the fact that it may deviate from the 25% limit; and(c) the Issuer does not exceed 50% of the average daily volume.
MKT 6.2.6 Restrictions(1) In order to benefit from the exemption provided by the Regulations, 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 closed period; or(c) trading where the Issuer has decided to delay the public disclosure of Inside Information in accordance with the Regulations.(2) Paragraph (1)(a) shall not apply if the Issuer is a Reporting Entity and has established effective information barriers (Chinese Walls) subject to supervision by the Regulator, 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.(3) Paragraphs (1)(b) and (c) shall not apply if the Issuer is a Reporting Entity and has established effective information barriers (Chinese Walls) subject to supervision by the Regulator, 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.(4) 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 a Reporting Entity 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.
MKT 6.2.7 MKT 6.2.7 Conditions for Stabilisation
MKT 6.2.8 Time-related conditions for Stabilisation(1) Stabilisation shall be carried out only for a limited time 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 Adequate Public Disclosure of the final price of the Relevant Securities and end no later than 30 days thereafter, provided that any such trading is carried out in compliance with the rules, if any, of the Recognised Investment Exchange 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 days after the date of Allotment.(4) In respect of bonds and other forms of securitised debt (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 days after the date on which the Issuer of the Instruments received the proceeds of the issue, or no later than two months after the date of Allotment of the Relevant Securities.(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 days after the date on which the Issuer of the Instruments received the proceeds of the issue, or no later than two months after the date of Allotment of the Relevant Securities.
MKT 6.2.9 Disclosure and reporting conditions for Stabilisation(1) The following information shall be adequately publicly disclosed by Issuers, Offerors, or entities undertaking the Stabilisation 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;(c) the beginning and end of the period during which Stabilisation may occur;(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; and(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.(2) 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 Regulator 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 Stabilisation 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; and(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 following information:(a) details of the names numbers of the Instruments bought or sold;(b) the dates and times of the transactions;(c) the transaction prices; and(d) means of identifying the investment firms concerned.(5) Where several Reporting Entities 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 Regulator.
Post-price Stabilisation Disclosure
To be adequately disclosed in a Prospectus, the information should appear under its own separate heading in the first few pages of the Prospectus.
MKT 6.2.10 Specific price conditions(1) In the case of an Offer of Shares or other Securities equivalent to Shares, Stabilisation of the Relevant Securities shall not in any circumstances be executed above the offering price.(2) In the case of an Offer of securitised debt convertible or 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.
MKT 6.2.11 Permitted Price Stabilisation(1) A Stabilisation Manager and, if applicable, his Stabilisation Agents may in respect of Relevant Securities:(a) purchase, or agree to purchase, such Relevant Securities; or(b) offer or attempt to do anything in (i) with a view to stabilising the market price of such Relevant Securities.(2) A Stabilisation Manager and his Stabilisation Agents may, in respect of Relevant Securities:(a) make allotments of a greater number of the Relevant Securities than were offered (‘over-allotment’);(b) sell or agree to sell the Relevant Securities in order to establish a short position in them;(c) buy or agree to buy the Relevant Securities in order to close out or liquidate any position that has been established by Price Stabilisation under (a) or (b);(d) sell or agree to sell the Relevant Securities in order to close out or liquidate any position that has been established by Price Stabilisation under (a) or (b); or(e) offer or attempt to do anything permitted by (a), (b), (c) or (d).(3) The Stabilisation Manager must not conduct, nor allow his Stabilisation Agent to conduct, Price Stabilisation in any case where:(a) the market price of the Relevant Securities is falsely higher than the price which would otherwise prevail; and(b) the Stabilisation Manage knows or ought reasonably to have known that the falsity in the market price was attributable in whole or in part to any conduct by a Person who was in breach of the Market Abuse provisions; or(c) any requirements of a Recognised Investment Exchange or any other exchange have not been complied with.
MKT 6.2.11 MKT 6.2.11 Conditions for Ancillary Stabilisation
In order to benefit from the exemption provided for in the FSMR, Ancillary Stabilisation must be undertaken in accordance with Rule 6.2.8 of this Regulation and with the following:(1) Relevant Securities may be over allotted only during the subscription period and at the Offer price;(2) a position resulting from the exercise of an Overallotment Facility by a Reporting Entity which is not covered by the Greenshoe Option may not exceed 5% of the original Offer;(3) the Greenshoe Option may be exercised by the beneficiaries of such an option only where Relevant Securities have been over allotted;(4) the Greenshoe Option may not amount to more than 15% of the original Offer;(5) the exercise period of the Greenshoe Option must be the same as the Stabilisation period required under Rule 6.2.8; and(6) 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.
The Stabilisation Manager may often be the lead manager in respect of an Offer, and can therefore over-allot Relevant Securities in the initial allocation and then facilitate the stabilisation by purchasing Relevant Securities during the Stabilisation Window. A Stabilisation Manager and his Stabilisation Agents may also sell short on the market to facilitate Price Stabilisation or in order to close out or liquidate positions established by Price Stabilisation.
MKT 6.2.13 Appointment of Stabilisation Manager and Stabilisation Agents(1) An Issuer/Reporting Entity who intends to carry out Price Stabilisation of its Relevant Securities/ must:(a) appoint in writing a Stabilisation Manager;(b) notify the FSRA of the appointment, including the name and business address of the Stabilisation Manager, the date of commencement of the appointment and an address for service in the ADGM of the Stabilisation Manager; and(c) prior to the appointment of the Stabilisation Manager, take reasonable steps to ensure that the Stabilisation Manager has the required skills, resources and experience to conduct the functions of a Stabilisation Manager.
(2) An Issuer/Reporting Entity must notify the FSRA immediately if the appointment of the Stabilisation Manager is to be terminated, or on the resignation of its Stabilisation Manager, giving the reasons for the cessation of the appointment.
(3) An Issuer/Reporting Entity must appoint a Stabilisation Manager to fill any vacancy in relation to the occurrence of an event specified in (2) and ensure that the replacement Stabilisation Manager can serve as such at the time the vacancy arises or as soon as reasonably practicable.
(4) Where a Stabilisation Manager appointed by an Issuer/Reporting Entity is not suitable in the opinion of the FSRA, or where a Stabilisation Manager has not been appointed, the FSRA may direct the Issuer/Reporting Entity to replace or appoint a Stabilisation Manager in accordance with the requirements in MKT 6.2.
MKT 6.2.14 Terms of Appointment for a Stabilisation Manager and Stabilisation Agents(1) The terms of appointment of a Stabilisation Manager must include at least the following information:(a) the period of the Stabilisation Window;(b) the Offer Price;(c) whether the Stabilisation Manager has discretion to commence Price Stabilisation at the Offer Price;(d) whether the Stabilisation Manager is permitted to appoint Stabilisation Agents;(e) a term whereby the Stabilisation Manager agrees unconditionally to submit to the jurisdiction of the FSRA and the ADGM Courts in relation to the activities of the Stabilisation Manager and his Stabilisation Agents in carrying out Price Stabilisation; and(f) any other information that the Stabilisation Manager believes it will reasonably need to conduct Price Stabilisation effectively.
(2) The Stabilisation Manager may appoint in writing one or more Stabilisation Agents to assist him in conducting Price Stabilisation.
(3) The terms of appointment of a Stabilisation Agent must not create a legal relationship other than that of principal and agent whereby the Stabilisation Manager as principal is responsible and liable for any acts carried out by his Stabilisation Agent.
(4) The Stabilisation Manager must establish a Price Stabilisation register and take reasonable steps to satisfy himself that the mechanisms required to update the register are in place.
MKT 6.2.15 MKT 6.2.15 Restrictions on transactions with Stabilisation Agents
(1) A Stabilisation Manager must not during the Stabilisation Window enter into a transaction as principal with any of his Stabilisation Agents in the Relevant Securities which are the subject of Price Stabilisation(2) The requirement in (1) does not apply:(a) if at the time of the transaction, neither the Stabilisation Manager nor his Stabilisation Agent knew or could reasonably have known the identity of his counterparty; or(b) where the transaction between the Stabilisation Manager and his Stabilisation Agent is undertaken solely for the purpose of reallocating the risk of positions that were taken by the Stabilisation Manager and his Stabilisation Agent in the course of Price Stabilisation and the transaction is priced accordingly.
Some participants in the Price Stabilisation may have accrued positions during stabilisation and Rule 6.2.15 permits transactions to ‘square-off’ the positions between participants. The terms on which these transactions may be carried may often be agreed in the terms of engagement between the Stabilisation Manager and his Stabilisation Agents. The FSRA may when inspecting records kept relating to stabilisation seek the rationale for any of these transactions and the price at which they were conducted.
MKT 6.2.16 MKT 6.2.16 Price Stabilisation Register(1) The Stabilisation Manager must, before carrying out any Price Stabilisation:(a) create a register to record the details relating to the Price Stabilisation as required by Rule 6.2.7 to 6.2.16; and(b) establish and implement systems and controls to keep the register updated.(2) The Stabilisation Manager must ensure that the register contains either on a real-time or daily updated basis the following information:(a) the names and contact details of all Stabilisation Agents appointed by him;(b) details of the appointment of each Stabilisation Agent, including the date of the appointment;(c) the general terms and instructions (including details of the price floor and Stabilisation Window) determined by the Stabilisation Manager for his Stabilisation Agents and the date and time of the communication, variation or revocation of that information and instructions;(d) details of all correspondence passing between the Stabilisation Manager and his Stabilisation Agents relating to the Price Stabilisation, including all instructions and variations or revocations of appointments;(e) each and every transaction undertaken by the Stabilisation Manager and Stabilisation Agents in the course of the Price Stabilisation, including but not limited to the following transaction details:(i) the type of Relevant Securities;(ii) the price;(iii) the size;(iv) whether the transactions were undertaken on or off the central order book of the relevant Recognised Investment Exchange;(v) the date and time;(vi) details of the counterparty (if known); and(vii) details of the allotment of the Relevant Securities.
GuidanceRule 6.2.16(e)(vi) recognises that some market infrastructures, for example, anonymous order books or anonymous indications of interest, allow for the identity of counterparties to sometimes be unknown prior to the effecting of transactionsRule 6.2.16 also accepts that some participants in the Price Stabilisation may have accrued uneconomic positions during Price Stabilisation and therefore permits a single transaction, probably at the end-of-day, to ‘square-off’ the positions between participants. The terms on which these transactions can be carried may often be agreed in the terms of engagement between the Stabilisation Manager and the Stabilisation Agents. The Regulator may when inspecting records kept relating to Price Stabilisation seek the rationale for any of these transactions and the price at which they were conducted.(3) The Stabilisation Manager must keep the register in the English language and keep it in a location that would allow for it, or a certified copy, to be available within three business days to any person permitted by Rules 6.2.16(4) and 6.2.16(5) to inspect it.(4) The following persons are permitted to inspect the register upon written request:(a) the Regulator;(b) the Recognised Investment Exchange upon which the Relevant Securities are admitted to trading; and(c) any other person the Regulator considers appropriate.(5) During the Stabilisation Window and within three months from the end of the Stabilisation Window, the Stabilisation Manager must, on any business day, permit the Issuer of the Relevant Securities to which the Price Stabilisation Rules apply to inspect the part of the register kept in accordance with Rule 6.2.16(2)(e).(6) The Stabilisation Manager must keep the register for a period of six years from the end of the Stabilisation Window.
MKT 6.2.17 MKT 6.2.17 Price Stabilisation and Dual-listings(1) Rule 6.2.17 applies to a Person who carries out Price Stabilisation of dual-listed Relevant Securities.(2) For the purposes of (1), ‘dual-listed Relevant Securities’ are Relevant Securities which are listed concurrently on a Recognised Investment Exchange (not being a Remote Investment Exchange) and on either a Remote Investment Exchange or an exchange in a jurisdiction other than the ADGM.
Guidance‘Dual-listed Relevant Securities’ in (2) would, in relation to one Listed Security, include Certificates (e.g., global depository receipts) and Warrants over the other Listed Security.
Price Stabilisation in the ADGM
Rule 6.2.17 allows a Person who is acting as a Stabilisation Manager in respect of a dual-listing of Relevant Securities to rely on the Price Stabilisation Rules or on the laws of a Zone 1 jurisdiction to conduct those activities. The Rule is intended to provide Stabilisation Managers with some limited flexibility in respect of their activities in the ADGM, so long as those activities are appropriately regulated.
MKT 6.2.18 MKT 6.2.18 Price Stabilisation from the ADGM(1) A Person who conducts, from the ADGM, Price Stabilisation of dual-listed Relevant Securities on a Remote Investment Exchange or an exchange outside the ADGM must:(a) ensure that such Price Stabilisation is conducted in accordance with the law of than non-ADGM jurisdiction; and(b) provide the ADGM adequate prior notification of such Price Stabilisation.
Rule 6.2.18 allows a Person who is acting as a Stabilisation Manager in respect of a dual-listing of Relevant Securities to rely on the laws of another jurisdiction to conduct those activities outside the ADGM. The Rule is intended to provide Stabilisation Managers with some limited flexibility in respect of their activities outside the ADGM.