MILAN, Italy - Italian jeweller Damiani wanted to give jewels to shareholders in return for their stock, but was disappointed when the market regulator said no to the idea, chief executive Guido Damiani told Reuters on Wednesday.

Family-controlled Damiani informed the regulator last year it wanted to invite small shareholders to swap their holdings for jewellery bearing the brand which has been promoted by several Hollywood actresses over the years including Isabella Rossellini, Gwyneth Paltrow, Jennifer Aniston and Sophia Loren.

But regulator Consob said this week that the company could not buy back shares in kind using goods - in this case jewels - the price of which it had decided itself.

"I had an idea, to give a small number of shareholders the option to swap their shares for jewels which would be worth more than the current market price of the shares," Damiani said.

"Our share price is a little depressed and there are shareholders who might have lost money. It seemed a nice idea to acknowledge them."

Shares in Damiani, known for its diamond creations, have dropped around 74 percent since its market debut in 2007, and were quoted on Wednesday at around 1 euro ($1.32). A one-off piece from Damiani's artisans can be priced in millions of euros.

But Consob said the buyback plan would break its rules that companies must treat shareholders equally and pay for share buy-backs with assets that have objective and transferable value.

Damiani said his firm was in contact with the regulator and hoped to be able to go ahead with the plan in future.

"We are always optimistic," said Damiani, whose grandfather Enrico started designing jewels back in 1924. "You shouldn't just say 'that's not how we do things' - you should say 'that's not how we do things now, but maybe we could'."

The company plans to discuss a share buyback - in return for money - at its shareholder meeting on Friday.