France increases protection mechanism against insider trading with the obligation for issuers whose securities are listed on the Euronext Paris Exchange to establish “Insider lists”

June 12, 2006

In order to better control market abuses and insider trading, EU Directive n° 2003/6/CE, dated January 28, 2003, on insider trading and market manipulation has been recently transposed into French law, through Law N° 2005-811 dated July 20, 2005. 

Pursuant to this law, article L. 621-18-4 of the Financial and Monetary Code (Code monétaire et financier) now provides that companies whose securities are traded on the Euronext Paris exchange [1], as well as companies in the listing process (whether French or not), shall maintain an updated list of all persons who work for the company and who have access to inside information which directly or indirectly concerns the company. This list should also include the names of third parties who have access to this type of information in the course of their business relations with the company. Moreover, third parties who have access to inside information should also prepare their own list with the name of the persons who work with and have access to inside information relating to the company. These insider lists must be available for inspection by the Autorité des Marchés Fianciers (AMF), the French equivalent of the SEC. 

By an ordinance dated December 30, 2005, the AMF General Regulations were modified and a new section entitled "Insider lists" was added. Articles 222-16 to 222-20 of the AMF General Regulations now provide for details regarding the disclosure of insider lists and their contents. The lists must provide the name of each insider, the reasons why they are listed, the date of the listing and of any update. They must be updated (i) in case of a change in the reasons for the listing of a person, (ii) when a new person is added, and (iii) when a person is de-listed. The lists must be kept on file for at least five years.

On January 18, 2006, the AMF published brief clarifications providing that companies subject to the requirement can opt to establish a single list comprising all persons who occasionally or regularly have access to inside information or can draw up two separate lists for permanent insiders and for temporary insiders. Permanent insiders are defined as employees of the company or third parties who have regular access to the inside information (such as managers of the company, statutory auditors, or usual advisors of the company,…). Temporary insiders are persons who have access to inside information for a specific transaction (for example, a tender offer). Also included in this category are the law firm preparing the offer document, investment banks and rating agencies. 

Companies must inform the concerned persons of their inclusion on the list, of the rules applicable to disclosure and use of inside information, and of the potential sanctions in case of insider trading. Such rules have not been changed.

There is no specific sanction in case of a failure to prepare such lists, but the AMF might use its injunction power provided in articles L 621-14 of the Financial and Monetary Code to force a company to disclose such a list. The AMF may also fine the company pursuant to article L 621-15 of the same code.

In May 2006, the National Association of Companies (Association Nationale des Sociétés par Actions, ANSA) published a guideline on how to establish insider lists [2] and how to inform the concerned persons of their listing. This guide also provides templates of the lists that need to be filed by companies.

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   [1]   According to ANSA, a French company with securities listed in another EU regulated stock exchange could also be requested by the AMF to provide such list.

   [2]  See ANSA, "Guide à l’intention des sociétés cotées pour l’établissement des listes d’initiés et l’information des personnes concernées", May 2006, n°06-016.


Gibson, Dunn & Crutcher lawyers are available to assist in addressing any questions you may have regarding these issues. Please contact the Gibson Dunn attorney with whom you work, or Sophie Resplandy-Bernard (sresplandy-bernard@gibsondunn.com) or Marie Artaud-Dewitte (martaud-dewitte@gibsondunn.com) at +33 1 56 43 13 00 in the firm’s Paris office.    

© 2006 Gibson, Dunn & Crutcher LLP

The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.