MAR 2.3 Preparation before and restrictions upon stabilising action
Before stabilising action is taken, the stabilising manager is required (under MAR 2.3.2 G) to take, or check that others have taken, proper steps to inform the market (and, so far as relevant, the issuer) that stabilising action may be taken and (under MAR 2.3.8 G) to verify that the price of any relevant securities or associated securities is not already false. He must also:
- (1)
be satisfied (under MAR 2.3.2 G) that proper systems have been set up (where required) for the central recording of any stabilising action; and
- (2)
(under MAR 2.3.9 G) not stabilise shares and certificates associated to bonds, loans, debentures, etc, if one is to be convertible into the other but the terms of conversion have not yet been announced.
The stabilising manager may not take any stabilising action in any relevant securities or associated securities in accordance with this chapter unless he has taken all reasonable steps to satisfy himself that:
- (1)
from the beginning of the introductory period (or where relevant the period mentioned in MAR 2.3.53 (3)(b)) adequate disclosure is made, in relevant communications issued by or on behalf of the issuer or the stabilising manager, of the fact that stabilising action may take place in relation to the offer;
- (2)
any requirement of the relevant exchange (see MAR 2.5.6 R note (2)) or other institution on which the relevant securities or associated securities are or will be traded (see MAR 2.1.3 R (3)) to inform it that stabilising action in those securities may take place during the stabilising period has been complied with;
- (3)
the stabilising manager has established the register required by MAR 2.7.2 R (1) (if that paragraph is binding upon him) for recording each stabilising action effected by him in the relevant securities or associated securities and the matters required to be recorded by MAR 2.7.2 R (2) in relation to it; and
- (4)
where the offer relates to an issue of relevant securities the issuer has been informed of the existence of the FSA informational guidance (MAR 2 Annex 2), either in relation to the offer in question or to a previous one.
- (1)
A stabilising manager who is required to comply with MAR 2.3.2 R (1) should ensure that the communications there referred to, if they fall within items 1 to 5 of MAR 2.3.4 E, contain the words suggested in, or otherwise fairly comply with, any relevant note to that table.
- (2)
Compliance with (1) may be relied on as tending to establish compliance with MAR 2.3.2 R (1).
Communication referring to the offer (see MAR 2.3.2 R (1))
Item |
Communication |
Relevant Notes (See MAR 2.3.5) |
1 |
Any screen-based statement |
1, 2, 3, 5 and 6 |
2 |
Press announcement (or other public announcement) |
2, 3, 5 and 6 |
3 |
Invitation telex (or similar) |
2, 5 and 6 |
4 |
Preliminary offering circular (or draft prospectus) |
4, 5 and 6 |
5 |
Final offering circular (or prospectus) |
4, 5 and 6 |
Notes to MAR 2.3.4 E
(1) Item 1 extends to any statement made by the stabilising manager or issuer on screen facilities (whether provided by the stabilising manager or not) conveying prices for a purchase or sale of securities. |
(2) For items 1, 2 and 3, adequate disclosure is given if the communication contains some indication of the fact that the offer may be stabilised in accordance with the price stabilising rules. The term "stabilisation / FSA" is sufficient for this purpose. During the introductory period a reference to the future prospectus or to the prospectus can be used instead if preferred. |
(3) Items 1 and 2 apply from the beginning of the shorter of two periods, that is: (a) the introductory period; or (b) the period beginning 45 days before the day proposed for the issue of the relevant securities and ending with the start of the stabilising period. |
(4) For Items 4 and 5 adequate disclosure is given if the communication contains wording substantially similar to the following: "In connection with this [issue] [offer ], [name of stabilising manager ] [or any person acting for him] may over-allot or effect transactions with a view to supporting the market price of [description of relevant securities and any associated securities] at a level higher than that which might otherwise prevail for a limited period after the issue date. However, there may be no obligation on [name of stabilising manager] [or any agent of his] to do this. Such stabilising, if commenced, may be discontinued at any time, and must be brought to an end after a limited period." |
(5) Where any communication referred to in items 1 to 5 is not to be issued to or directed at persons in the United Kingdom , the notice required by those items may be adapted or omitted. |
(6) Where any communication referred to in items 1 to 5 is to be issued to or directed at persons in the United Kingdom and persons elsewhere, the notice required by those items may be adapted or omitted so as not to require the stabilising manager or any agent of his to commit any breach of any legal rule or requirement in respect of any communication issued to or directed at persons outside the United Kingdom. |
The requirement in MAR 2.3.2 R (1) to make adequate disclosure in communications does not apply to any communication which is not mentioned in table MAR 2.3.4 E.
An FSA consumer factsheet has been prepared which explains to potential investors the significance of the fact that stabilisation may take place in the relevant securities offered. The factsheet is available on the FSA's website and may in addition be obtained from the FSA by post, free of charge. The stabilising manager acting for the issuer should consider drawing attention to the availability of this factsheet in prospectuses which are aimed at private customers.
- (1)
The stabilising manager may not take stabilising action in any case where:
- (a)
there are in existence associated securities;
- (b)
at the time when the offer price of the relevant securities was determined, the market price of the associated securities was falsely higher than the true market price; and
- (c)
the stabilising manager knew or ought reasonably to have known that the falsity in the market price was attributable in whole or in part to any act or course of conduct on the part of any person which was in breach of section 397(2) or (3) of the Act.
- (a)
- (2)
The stabilising manager may not take stabilising action in any case where:
- (a)
at the time when the offer price of the relevant securities was determined, the market price of the relevant securities or of rights to them, whether in informal trading or otherwise, was falsely higher than the price which would otherwise have prevailed; and
- (b)
the stabilising manager knew or ought reasonably to have known that the falsity in the market price was attributable in whole or in part to any act or course of conduct on the part of any person which was in breach of section 397(2) or (3) of the Act.
- (a)
The stabilising manager may not take stabilising action in any case where:
- (1)
the relevant securities fall within article 77 (instruments creating or acknowledging indebtedness), 78 (Government and public securities) or 79 (instruments giving entitlements to investments) of the Regulated Activities Order;
- (2)
there are, in relation to those relevant securities, associated securities falling within article 76 (shares, etc) or 80 (certificates representing certain securities) of the Regulated Activities Order, into which those relevant securities can be converted or to the purchase of which those relevant securities give rights; and
- (3)
the terms of the conversion, purchase or subscription have not yet been publicly announced.
The general purpose of MAR 2.3.9 G is to place a restriction on stabilising bonds convertible into equities, and warrants for equities, in cases where the terms of the conversion or right to purchase have not yet been settled. Prime examples would be a convertible loan stock of a public limited company, but MAR 2.3.9 G also covers similar cases such as government debt instruments which are convertible into shares, for example a privatisation in the United Kingdom or overseas.
The stabilising manager may not take stabilising action in any case where:
- (1)
he or an associate of his has, in connection with the offer, an option or other right to purchase relevant securities from the issuer; and
- (2)
that option or right may be exercised or relied on after the start of the introductory period and during or after the remainder of the stabilising period;unless the existence and principal terms of the option or right have been disclosed in the relevant prospectus or offering document or in a public announcement.