CNMV Rolls Back the Rules on Discretionary Stock Repurchases

The Spanish Securities and Exchange Commission (CNMV) has decided to roll back the rules on discretionary stock repurchase trading by publicly traded companies on grounds that it cannot be considered “safe harbor” under currently applicable regulations on market abuse.

On January 13, the National Securities Market Commission (the “Commission”) announced its decision that the rules on discretionary stock repurchases by publicly traded companies issued on July 18, 2013 were superseded and without effect. Those rules laid down a set of guidelines on the conditions for trading in companies’ own capital stock to avoid or mitigate the possible risks of market abuse.

The Commission  explains that the only “safe harbors” for this type of trading are either stock buyback programs or stock price stabilization, regulated under Regulation EU 596/2014 of April 16 2014 on market abuse, or liquidity contracts as provided in the Commission’s Circular 1/2017 (amended by Commission’s Circular 2/2019) with effect from March 10, 2020. 

According to Spain’s supervisory authority, stock repurchases pose an inherent risk to the free setting of prices by the market, which justifies its cautious stance. The Commission considers investors are at a disadvantage because they lack the tools to assess investment risks in advance, since the  information on the objective, amount, and period of execution is sketchy.

As a result, any stock repurchases that deviate from “safe harbors” will be subject to review by the Commission to assess compliance with the prohibition against market manipulation and the use of insider information.