On June 14, 2016 the London Stock Exchange (LSE) published AIM Notice 45, which provides feedback on AIM Notice 44 and confirms the resulting changes to the AIM Rules for Companies (the AIM Rules) as well as consequential changes to the AIM Rules for Nominated Advisers and the AIM Note for Investing Companies in relation to the Market Abuse Regulation (MAR).
The rule changes proposed in AIM Notice 44 will be implemented in full save for certain consequential changes to the definition of “applicable employee” and the guidance to Rule 21.
In discussing the feedback received, the LSE notes the following:
AIM Rule 11
AIM Rule 11 concerning general disclosure of price sensitive information is to be retained, so companies will be subject to this in addition to MAR. However, AIM Regulation does not consider that retaining AIM Rule 11 will be overly burdensome due to the fact that: (i) AIM Regulation intends to work closely with the Financial Conduct Authority (FCA) to reduce any duplication of regulation and will be sharing information on real time discussions regarding disclosure; and (ii) the current application of AIM Rule 11 by nominated advisers and companies will not change. However, AIM Regulation will keep the operation of Rule 11 under close review.
Guidance to AIM Rule 11(e)
Some respondents commented that the guidance note to AIM Rule 11(e) should be aligned with Article 17(4) of MAR which enables an issuer to delay disclosure to the public provided certain conditions are met and/or that AIM Regulation should provide guidance regarding circumstances when they may not align. However, given that the application and interpretation of MAR is not within the LSE’s remit, AIM Regulation states that it cannot comment on whether in all circumstances a delay under Article 17(4) of MAR will also align with an ability to delay under AIM Rule 11. However, AIM Regulation anticipates that, given their experience of AIM, the judgement of whether a notification may be delayed pursuant to the guidance to AIM Rule 11 should in most cases be a simple one for the company’s nominated adviser to confirm. Where this is not the case, the nominated adviser is able to seek guidance from AIM Regulation as to the application and interpretation of the AIM Rules.
As a result, where an AIM company is in possession of information which is both inside information and price sensitive information and if it is unable to delay that information under Article 17(4) of MAR, the AIM company will have an obligation to notify that information under MAR. However, if an AIM company has decided that it may delay that information in accordance with Article 17(4), in parallel it must consider whether any AIM Rule exemptions also allow the AIM company to delay that information. AIM Regulation reiterates the need for an AIM company to seek the guidance of its nominated adviser in making this determination in the context of the AIM Rules, which are principles-based and will be separate to an AIM company’s consideration of MAR. It will not be a defence to a breach of the AIM Rules that the AIM company had received legal advice instead of consulting its nominated adviser.
Definition of applicable employee
For the purposes of Rule 21 concerning an AIM company’s dealing policy, the definition of applicable employee is, other than a director, someone who is a ‘person discharging managerial responsibilities’ (PDMR) as defined in Article 3(25) of MAR.
AIM Rule 21 - Dealing policy
Given the different profile and resources of premium listed issuers when compared to AIM companies, AIM Regulation considers it is important that AIM companies be required to establish a dealing policy that complies with minimum provisions. This is particularly key for AIM companies which are, by their nature, smaller with major shareholders also often being directors of the company. AIM companies are already required to have sufficient procedures, resources and controls under AIM Rule 31 and in this regard will have in place existing controls on close period dealings. The new AIM Rule 21 is intended to provide high-level assistance to AIM companies to understand what should be included as a minimum.
The design of the policy should be considered in a meaningful way, taking into account the needs of the particular company and ways to ensure that the policy is understood and applied effectively in practice. In particular, the adoption of boilerplate templates which are not tailored to the company’s circumstances should be avoided.
AIM Regulation considers that AIM companies should have in place a dealing policy by 3 July 2016. They do not consider the provisions disproportionate as they reflect what is considered to be a sensible approach for AIM companies and the obligations under MAR come into effect on that date.
AIM Regulation notes that the FCA has issued an update on its website in relation to closed periods and preliminary results. AIM Regulation welcomes the FCA’s supervisory approach on this matter which refers to issuers (including AIM companies) which choose to publish preliminary results, whilst it awaits clarification from the European Commission and the European Securities and Markets Authority. AIM Regulation will consider making changes to the AIM Rules once further clarification on this point becomes available.
AIM Regulation confirms that the nominated adviser’s responsibilities and obligations under the Nomad Rules are owed solely to the LSE and do not extend to advising and guiding an AIM company on its obligations beyond the AIM Rules, including MAR. This is also set out in AIM Rule 1 and the guidance to AIM Rule 11(b) makes it clear that MAR contains separate disclosure obligations for AIM companies, and in the UK, the FCA is the competent authority for those obligations.
Guidance to AIM Rule 41
AIM Regulation also clarifies, in the guidance to AIM Rule 41, that the circumstances in which the LSE might otherwise agree that shareholder consent in general meeting to cancel the trading of AIM securities is not required, include where an AIM company maintains or will be admitted to trading on an EU regulated market or an AIM Designated Market.
The revised AIM Rules will come into force on July 3, 2016 to coincide with MAR.
(LSE, Aim Notice 45: Feedback on Aim Notice 44 and Confirmation of Changes to Aim Rules, 14.06.16)
(LSE, AIM Rules for Companies – July 2016, 14.06.16)