AIM companies and the Market Abuse Regulation – LSE publishes final rules

The London Stock Exchange (LSE) has published AIM Notice 45 which comprises itsfeedback on the consultation it launched in April proposing changes to the AIM Rules for Companies (AIM Rules) in advance of the Market Abuse Regulation (2014/296/EU)(MAR) coming into effect on 3 July 2016. The published amendments will apply from that time. The notice is accompanied by a version of the AIM Rules marked up to show the final changes. The LSE has also published consequential amendments to the AIM Rules for Nominated Advisers and the AIM Note for Investing Companies.

Overview of the proposed amendments

For an overview of the proposals published in April – click here. In summary, the LSE had proposed:

  • the retention of AIM Rule 11 dealing with the disclosure of price sensitive information to the market intending that this should operate in parallel with the inside information disclosure regime in Article 17 of MAR;
  • the deletion of aspects of AIM Rule 17 relating to the disclosure of directors' dealings on the basis that AIM Rule 17 will have been superseded by Article 19 of MAR; and
  • the replacement of AIM Rule 21 with a requirement for AIM companies to put in place a "reasonable and effective" share dealing policy which should apply to directors and "applicable employees".

Changes to the proposals

The substance of all the proposals has been carried forward unaltered. The only exceptions being:

  • an alteration to the proposed new definition of "applicable employees" which had previously caught employee insiders but will now only extend to directors and others considered to persons discharging managerial responsibilities under MAR;
  • the amendment to the proposed guidance to AIM Rule 21 which now states that the LSE would expect an AIM company to appoint an individual of sufficient seniority (rather than independent staff of sufficient seniority) to grant clearance to deal under an AIM company's securities dealing code.

AIM Rule 11 and the dual regulatory regime

The retention of AIM Rule 11 means that AIM companies will be subject to a dual regulatory regime. The LSE does not consider that retaining AIM Rule 11 will be overly burdensome, however, due to the fact that: (i) they intend to work closely with the Financial Conduct Authority (FCA) to reduce any duplication of regulation and, in this regard, will be sharing information on any "real time discussions" regarding disclosure; and (ii) the current application of AIM Rule 11 by nominated advisers (Nomads) and companies will not change.

The guidance in the AIM Rules on when an AIM company can delay disclosure has not been harmonised with the equivalent provisions in MAR despite requests that the LSE do so. The LSE states that it cannot comment on whether in all circumstances a delay under MAR will also align with an ability to delay under AIM Rule 11. However, it does anticipate Nomads should, in most cases, find it a simple judgement as to whether an AIM company is permitted to delay disclosure and, where that is not the case, Nomads should seek the guidance from AIM Regulation.

This means that, 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 disclosure of that information under MAR, it will have an obligation to disclose it. However, if an AIM company has decided that it may delay disclosure under MAR, in parallel it must consider whether any AIM Rules exemptions also allow the AIM company to delay disclosure under the AIM Rules.

Consequently, the LSE reiterates the need for an AIM company to seek the guidance of its Nomad in making a determination in the context of the AIM Rules, separately to an AIM company's considerations of MAR. It will not be a defence to a breach of the AIM Rules that an AIM company had received legal advice instead of consulting its Nomad.

Securities dealing policies

The LSE has carried forward its proposal for an AIM company to put in place a "reasonable and effective" securities dealing policy despite this arguably creating a more onerous obligation than for companies listed  on the main market. One reason given for this result is that AIM companies are, by their nature, smaller with major shareholders often also being directors of the company. In addition, requiring a dealing code merely builds upon an AIM company's obligation to have in place sufficient systems, resources and controls under AIM Rule 31 to ensure that it meets its obligations, one of which is currently to bar dealings in close periods by directors and applicable employees.

As regards the meaning of "reasonable and effective" in this context, the LSE states that it expects the policy to 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 LSE believe that the adoption of boilerplate templates which are not tailored to the company's circumstances should be avoided.

The LSE also notes the clarification of the FCA as regards closed periods under MAR and preliminary results. For our CQC update issued at the time – click here. The LSE will consider making changes to the AIM Rules once further clarification from the European Commission and ESMA becomes available.

Rules for Nominated Advisers

The LSE have confirmed that Nomad responsibilities and obligations under the Rules for Nominated Advisers are owed solely to the LSE and do no extend to advising or guiding an AIM company on its obligations beyond the AIM Rules, including MAR. Having said that, AIM companies will need to ensure that they have recourse to advice on MAR, whether that is from their Nomad or another adviser.

Next steps

The revised rules take effect from 3 July 2016. The LSE states that it intends to keep the operation of  its rules under review and in particular monitor how they work in practice. We will, of course, provide further updates, when appropriate, and certainly when the LSE fulfils its stated intention to issue a list of FAQs on the impact of the MAR regime.

ISDX: consultation on changes to Growth Market Rules and Corporate Adviser Handbook

ICAP Securities and Derivatives Exchange (ISDX) has published for comment draft revised versions of the ISDX Growth Market Rules for Issuers and the related Corporate Adviser Handbook to reflect MAR coming into force.

The ISDX Market Notice contains an overview of the proposed changes - click here. The Notice is accompanied by a version of the Growth Market Rules marked up to show theproposed changes.

The consultation closes on 27 June 2016.