The London Stock Exchange (LSE) has announced that a nominated advisor (Nomad) has been privately censured and fined £90,000 (allowing for a discount for early settlement) by the AIM Executive Panel. Click here to read the AIM disciplinary notice.
Which Nomad Rules were breached?
The nominated advisor was found to have breached the following AIM Rules for Nominated Advisors (Nomad Rules):
- Due skill and care - Nomad Rule 16
- Advising and guiding an AIM company – Nomad Rule 17
- Liaison with the LSE – Nomad Rule 19
What were the facts?
- The Nomad's failures related to the AIM company's notification of a transaction pursuant to AIM Rule 11 of the AIM Rules for Companies (AIM Rules) (disclosure of price sensitive information).
- The AIM company had notified the market that it was due to receive payments, which were material to the business, on a specified future date. However, when the payments were not made on that date, the company did not notify the market of that fact.
- Despite the Nomad being aware that the payments had not been made and discussing the matter with the company, it failed to advise the company of its disclosure obligations to update the market.
- The Nomad justified its actions (or lack of) by stating that the payments were, in any event, expected to be forthcoming and that it had relied on a narrow interpretation based on a legal definition regarding the obligations of payment.
- The LSE rejected these arguments and stressed the importance of updating investors of the revised timetable for the payments and that a failure to do so would leave investors with a misleading impression that the payments had been made on the due date.
Lessons to be learnt
Always consider updating the market where changes affect the original announcement
Nomads and AIM companies must consider whether to update the market where the company has announced a matter which is to occur at a future date and there are subsequent changes which would make the original announcement to the market misleading. In particular, the LSE reminds the market of AIM Rule 10 which requires an AIM company to take reasonable care to ensure that any information it notifies is not misleading, false or deceptive and does not omit anything likely to affect the import of such information.
The Exchange gave the following non-exhaustive of examples where an issuer should consider updating the market:
- A company notifies that a loan is to be drawdown or repaid on a future date and that does not happen.
- A fundraising is notified with proceeds due on a certain date and payment is not received.
- A timetable of events is notified and the timetable is delayed.
AIM companies and Nomads should be wary of relying on narrow legalistic interpretations of either underlying circumstances or of the AIM Rules in assessing their obligations.
Information provided to the LSE must be correct, complete and not misleading
The LSE identified that a market update by the company may be required after enquiries were made of the Nomad. However, the LSE found that when liaising with the Nomad regarding a required update, the Nomad did not take sufficient care to provide the LSE with all relevant information. Consequently, the LSE found that the Nomad had breached Nomad Rule 19 for insufficient liaison with it and not ensuring that all information provided to it was correct, complete and not misleading.
Any surprises for the market?
The notice reveals no major surprises but serves as a helpful reminder to issuers and nomads to continually monitor circumstances following an announcement and assess whether a market update is required. Notably, the LSE highlights that the timing of announced events should not be overlooked - even if the relevant events announced are likely to occur, investors should be made aware of their timing if this constitutes a change to what was originally announced.