On 3 July 2016, stringent new European rules come into effect which will significantly impact the way AIM companies, brokers and nominated advisers (Nomads) operate, particularly in relation to the control of inside information, announcements and staff dealings.
The EU Market Abuse Regulation (2014/596/EU) (MAR) will replace the UK’s current civil law offence of market abuse, with the underlying objectives of enhancing market integrity and investor protection, and harmonising the market abuse regimes across the EU.
In view of the new rules, AIM companies should review their internal policies and procedures, assess the impact on their share plans, consider what additional records they will need to keep, understand what notices they will be required to give to the Financial Conduct Authority (FCA), and consider what staff training is required.
The AIM team at the London Stock Exchange has published details (AIM notice 45) of the amendments to the AIM Rules that will come into effect on 3 July to take account of MAR.
Disclosure of inside Information/AIM Rule 11
- Requirement for issuers to state in any relevant announcement that it contains inside information in accordance with Article 17 of MAR. Companies are also required to inform the FCA to the extent the announcement of inside information has been delayed, and provide certain information to the FCA relating to the delay either in all circumstances or on request by the FCA.
- The disclosure obligation under Article 17 of MAR is to protect investors from market abuse, whereas AIM Rule 11 (General disclosure of price sensitive information) aims to maintain a fair and orderly market in securities, and to ensure that all users of the market have simultaneous access to the same information in order to make investment decisions.
- “Inside information” is specifically defined under the MAR, whereas AIM Rule 11 takes a principles-based approach in the context of maintaining a fair and orderly market. From a compliance standpoint, the London Stock Exchange does not envisage a different approach following the implementation of MAR. Failure by an AIM company to comply with AIM Rule 11, or to seek the guidance of its Nomad pursuant to AIM Rule 31, will be regarded as a serious breach of the AIM rules and may result in the London Stock Exchange taking disciplinary action in addition to its powers to suspend or cancel an admission.
- New dealing notices (pursuant Article 19 of MAR) to be given by companies, persons discharging managerial responsibility (PDMRs) and persons closely associated to them, in addition to mandatory close period rules.
- Notification must be given directly not only to the company but also to the FCA on a new prescribed form, although strictly they are only required for dealings above a EUR5,000 threshold. Companies will be required to make PDMRs aware of their obligations but also consider whether and, if so, how, to apply the threshold.
- AIM Rule 21 will be amended to require all companies to have a dealing policy and require all Nomads to consider this as part of their responsibilities. AIM regulation notes that an AIM company will not have been deemed to automatically have satisfied its obligations under AIM Rule 21 simply by complying with MAR.
- All AIM companies will be required to keep a secure electronic list (in a prescribed format) of all those persons working for them that have access to inside information (Article 18, MAR), and make the same available to the FCA on request.
- The company is also obliged to ensure that others working on its account keep similar lists. The company must also take all reasonable steps to ensure that those on the insider list acknowledge their legal and regulatory duties and are aware of the sanctions for insider dealing and improper disclosure of inside information.
- This is a significant change for AIM quoted companies since MAR will require compliance with this strict record keeping regime. The FCA will be responsible for enforcing compliance with Article 18.
- The MAR establishes a safe harbour from the existing offence relating to the unlawful disclosure of insider information by companies or their advisers by providing for MAR compliant “market soundings”, which are defined as “a communication or information, prior to the announcement of a transaction, in order to gauge the interest of potential investors in a possible transactions and the conditions relating to it such as its potential size or pricing, to one or more investors.”
- The new market soundings regime will require detailed records to be kept in a prescribed format, including documentation of whether inside information is disclosed, the reason for it, the information disclosed, and the date and time of each disclosure. The records must be provided to the FCA on request and must be kept for five years. Specific information must also be given to recipients of market soundings which are outlined in separate guidelines advising them of their duties under the MAR.
AIM Regulation/FCA compliance
AIM Regulation notes that the FCA is the competent authority for MAR in the UK but where there is a query as to whether an AIM company should make a disclosure, AIM Regulation will continue to liaise with the AIM company’s Nomad in relation to its AIM Rules obligations and provide the FCA with information in this regard where relevant to MAR. The FCA are free to consider an AIM company's compliance with MAR at any time - AIM Regulation will not be able to opine on MAR obligations or compliance with MAR. Any guidance provided by AIM Regulation in respect of disclosure will only be in relation to an AIM company's obligations under the AIM Rules.
How to prepare for the new regime coming into effect on 3 July 2016
Key areas of action for AIM companies:
- Adoption of a new dealing code that is compliant with the new AIM Rule 21 and MAR;
- Review of any other internal policies and procedures that may need to change (e.g. AIM Compliance policy) to ensure the Company complies with the new AIM Rules for Companies and MAR;
- Provision of training to training to all directors, PDMRs and applicable employees as appropriate;
- Maintenance of insider lists in accordance with MAR; and
- Ensuring that all publicly disclosed inside information is posted on the Company’s website and will remain publicly available for at least five years thereafter.
This update does not provide legal advice and is solely intended to bring to your attention the changes that are coming into effect. If you have any queries or require more information on the new regime, please get in touch with your usual contact at DMH Stallard LLP or: