What's happening on AIM?

In this article, we summarise the latest key news and developments affecting AIM companies and their nominated advisers (Nomads).

AIM publishes its new rules for companies and Nomads

On 13 May 2014, the London Stock Exchange plc (LSE) published AIM Notice 39 which provides feedback on its consultation launched in AIM Notice 38 regarding proposed amendments to the AIM Rules for Companies (AIM Rules) and AIM Rules for Nominated Advisers (Nomad Rules). Click here for our summary of the consultation. The majority of the proposals are reflected in the new rules, but there are a few key changes to note:

  • Guidance note to AIM Rule 11 – Price sensitive information: the guidance note to AIM Rule 11 has been amended to clarify that when considering whether information is 'price-sensitive', AIM companies should adopt the 'reasonable investor' test set out in the Financial Services and Markets Act 2000 (FSMA). The guidance provides that companies will need to consider whether information is of a kind which a 'reasonable investor would be likely to use as part of the basis of his or her investment decisions'.
  • AIM Rule 22 and 43 – The LSE has proceeded with its proposals to confirm in the AIM Rules that it retains jurisdiction over companies which have cancelled their admission to trading on AIM. Additionally, the LSE clarifies in the new rules that it would not expect Nomads to be a point of liaison with a cancelled company during any of its investigations. Consequential changes have been made to the AIM Disciplinary Handbook.
  • AIM Rule 26 – Corporate Governance: The list of information that must be available on a website under AIM Rule 26 has been expanded. Amongst other things, the AIM company must disclose the corporate governance code that it has decided to apply, how it complies with that code, or, if no code has been adopted, it must disclose that fact. Since the consultation version, new language has been added to require the AIM company to clarify its corporate governance arrangements if it has not adopted a governance code.
  • Guidance note to AIM Rule 26 – Following the LSE's new status as a recognised growth market for the purposes of the new stamp duty reserve tax exemptions, new guidance has been provided to remind AIM companies that, if they list on a Recognised Stock Exchange (in which case they are no longer eligible for the exemption) or cease to be listed on such an exchange, they are required to update their website and inform Euroclear UK & Ireland Limited of any changes in stamp duty status.
  • Nomad Rule 4: In response to queries from respondents, the LSE has clarified that periods of maternity, paternity and garden leave would not ordinarily prejudice a potential qualified executive's ability to demonstrate that they have been approved on a 'continuous basis'. Other periods of extended leave will be considered on a case-by-case basis. 
  • Nomad Rule 11: In the consultation, the LSE had proposed that Nomads should inform AIM Regulation as soon as possible of any potential change of control. Minor changes have now been made to the rule so that only changes of control 'which are reasonably likely' must be notified. The guidance provides that, where a Nomad is unclear as to whether there would be a change to the control of its business, guidance from the LSE should be sought.

The changes to the AIM Rules, Nomad Rules and Disciplinary Handbook come into immediate effect, save for the new requirements in AIM Rule 26, which must be implemented by 11 August 2014. We understand that AIM will be considering a consultation on more substantive changes to its AIM Rules in due course, so watch this space for further developments!

Lessons to be learnt – LSE publishes AIM Disciplinary notice

On 8 May 2014, the LSE announced that it has privately censured and imposed a fine of £90,000 on an AIM company for breaches of certain AIM Rules. In order to send a clear message to AIM companies and Nomads of their regulatory obligations, the LSE published details of the breaches on an anonymous basis so that lessons can be learnt.

The notice reports that an AIM company breached AIM Rule 13 by failing to notify the market, without delay, of transactions with its known related parties. Additionally, the Company breached AIM Rule 31 by not taking into account the advice of its nominated adviser despite being advised by its Nomad that a proposed transaction would constitute a related party transaction which would be subject to the relevant AIM provisions. Furthermore, the Company failed to provide its Nomad with complete information and was not fully transparent in relation to its dealings with the related party. These failures hindered the Nomad's ability to perform its own responsibilities.

The notice emphasises the importance of the role of the Nomad to advise and guide AIM companies on their AIM rule obligations. AIM companies are reminded to maintain open and honest communications with their Nomads and take into account their advice in relation to their compliance with the AIM Rules. Essentially, Nomads have a key role in the regulation of the AIM market and consequently, it is essential that companies pay due attention to their advice.

The LSE notes that it considered several factors during the disciplinary investigation, including that there was no discernible market impact from the delay in complying with AIM Rule 13, the Company's general compliance history and its co-operation with the LSE during the investigation. Perhaps we might have seen a more significant penalty for these breaches if these factors were not as favourable in the circumstances.