On 26 April 2018, the London Sotck Exchange (LSE) published AIM Notice 51 which launches a consultation on its proposals to amend the AIM Rules for Nominated Advisors (Nomad Rules or Rules). The consultation follows its Discussion Paper – AIM Rules Review (July 2017), in which the LSE confirmed that it would be reviewing its supervisory powers in order to promote consistency of standards across the market.
What are the key changes?
The proposed changes seek to clarify the LSE's supervisory powers and its considerations regarding the eligibility of firms acting as nominated advisers (Nomads).
In particular, the LSE proposes the following key changes:
- Eligibility criteria (Rule 2): Additional eligibility criteria are proposed for an applicant seeking approval as a Nomad, which includes requiring evidence that the applicant is capable of being effectively supervised by the LSE; has appropriate financial and non-financial resources; can comply with Rules 23 to 25 (Procedures, staff and records); and has adequate risk management systems to ensure that it can identify, assess, manage, monitor and control risk appropriately.
- Notifications relating to Nomad changes (new Rule 12): The new Rule sets out a non-exhaustive list of types of information which must be notified to the LSE regarding key changes in the operation, role or performance of a Nomad. Key changes to be notified include the commencement of regulatory investigations in any jurisdiction relating to the conduct of the Nomad or any of its employees and any proposed or contemplated likely change of control of a Nomad.
- Supervision of Nomads (new Rule 27): The new Rule clarifies the actions that may be taken by the LSE in relation to a Nomad's performance. These include requiring the Nomad to take specific remedial action and imposing restrictions or limitations on its provision of certain services.
- Supervision of Qualified Executives (new Rule 27(c)): under existing Rule 27, the LSE may remove a Qualified Executive’s status in certain circumstances. However, the LSE notes that its preferred approach is to work with Nomads and, consequently, Rule 27 (c) proposes that the LSE may require remedial action and/or restrictions on the status of a Qualified Executive where it is concerned about his or her conduct, competency and/or suitability.
- Moratorium on acting for further AIM companies (Rule 31): The proposed amendments seek to clarify the examples of circumstances in which the LSE may prevent a Nomad from acting in this role in relation to any additional AIM companies, including where the LSE has reasonable concerns that a Nomad's procedures, systems and controls are not appropriate to support its services or where there is an unplanned, temporary or permanent loss of appropriately experienced members of staff.
- Jurisdiction (new Rule 30): The LSE clarifies that it has jurisdiction over Nomads which were once but are no longer approved in relation to breaches or suspected breaches of the Nomad Rules or AIM Rules for Companies that occurred whilst the firm was approved as a Nomad.
Responses to the proposals must be submitted to firstname.lastname@example.org on or before 25 May 2018. Note that, on the implementation of any rule changes arising from the consultation, the LSE has confirmed that it will issue consequential amendments to Forms NA1 (applicant nominated adviser) and NA2 (applicant qualified executive) which will be uploaded to the LSE website.
Additionally, the LSE notes in AIM Notice 51 that it is reviewing the Disciplinary Procedures and Appeals Handbook with an intention to issue a separate consultation later this year.