We take a look at the latest key developments concerning the AIM market - namely, the recent private censure of an AIM company for failing to liaise with its nominated adviser and the latest publication of 'Inside AIM' in which the LSE publishes new guidance for AIM companies on the interaction of their use of social media with their disclosure obligations under the AIM Rules.
AIM Disciplinary Notice: Failure to liaise with Nomad
An AIM company (Company) has been privately censured and fined £75,000 by the London Stock Exchange (LSE) for its failure to liaise with its Nomad in breach of AIM Rule 31. On 15 December 2016, the LSE published an AIM Disciplinary Notice (Notice) which set out details of the disciplinary action taken by the LSE's AIM Disciplinary Committee. The Notice highlighted the importance of a company's obligation to liaise with its Nomad pursuant to AIM Rule 31.
The AIM Disciplinary Committee held that the Company failed to:
- provide its Nomad with information reasonably required for the Nomad to carry out its responsibilities owed to the LSE, and
- seek its Nomad's advice regarding compliance with the AIM Rules at the appropriate time.
In particular, the Notice states that:
- the Company ought to have informed its Nomad of, and sought advice in relation to, a series of business developments. It was not appropriate for the Company alone to ascertain whether or not the business developments were disclosable under the AIM Rules;
- the Company's obligation to inform and consult with its Nomad applied to a wider range of developments than those which must be announced under AIM Rule 11 (General disclosure of price sensitive information);
- it was not sufficient for the Company to send agendas and minutes of board meetings to its Nomad, without any context or conversation, and assume that such actions discharged the Company's AIM Rule 31 responsibilities. Developments within the business need to be shared openly and fully with the Company's Nomad, and advice must be sought from the Nomad on the Company's obligations in respect of those developments; and
- contractual obligations between an AIM company and its Nomad do not override the Company's responsibilities under the AIM Rules.
Lessons to be learnt
The Notice is another reminder to AIM issuers to fully engage with their Nomads – not just when disclosure is required pursuant to AIM Rule 11 and irrespective of whether the Nomad and Broking Agreement between the Company and its Nomad explicitly requires such engagement. The LSE emphasises the importance of an AIM company's AIM Rule 31 obligations to liaise with its Nomad and states that the Rule should not be narrowly interpreted but rather, should be interpreted purposively, so that the company is required to provide full, timely and regular information to its Nomad.
Inside AIM – LSE issues guidance for AIM companies on their use of social media
The London Stock Exchange (LSE) has published guidance for AIM companies on the interaction of their use of social media with their disclosure obligations under the AIM Rules.
In its Inside AIM newsletter, published on 12 December 2016, the LSE acknowledged that social media and other forms of electronic communication are powerful tools used by AIM issuers to communicate with a wide range of investors and stakeholders – but the LSE reminds issuers that whatever their chosen form of public communication, they need to ensure that they comply with the AIM rules regarding the disclosure of regulatory information.
The key messages from the guidance are set out below.
Social media - no substitute for an AIM notification to a RIS
- Disclosure by social media alone will not meet a company's disclosure requirements. The company must continue to use traditional means of regulatory dissemination which takes precedence over any other form of communication.
- The LSE stresses the importance of AIM Rule 10 (which provides that disclosure must be notified by the AIM company 'no later than it is published elsewhere') and AIM Rule 11 (which requires issuers to disclose price-sensitive information without delay). Both Rules require equal, fair and timely disclosure of information to ensure that market integrity is safeguarded. The LSE notes that the consequences of breaching these Rules include the suspension of an AIM company's securities from trading where there has been an unusual share price movement due to an inequality of information in the market and further disciplinary action against the issuer.
- Companies should also have regard to the Market Abuse Regulation (MAR). MAR must be considered separately from its AIM disclosure obligations and compliance with it is within the FCA's remit.
Systems, procedures and controls
- Companies which make use of social media must consult with their Nomad on how to effectively monitor and supervise the dissemination of information to ensure that they are complying with their AIM disclosure obligations.
- A company must take into account its use of social media and other forms of electronic communication when putting in place its systems, procedures and controls so that it is able to comply fully with its AIM obligations. In particular, an issuer should consider, amongst other things:
- whether it has an effective policy on the use of social media as part of its existing communication policies;
- whether the policy has been regularly reviewed, updated and rolled out to, and understood by, the relevant persons;
- whether it has satisfied itself that any third parties engaged to disseminate regulatory information on its behalf including, via social media, will not compromise its compliance with the AIM rules; and
- what the protocols are for talking to its Nomad in advance of releasing information via social media?
Internet discussion forums
- The LSE notes that an AIM company and its Nomad must consider how they keep reasonably informed about social media posts (such as on internet discussion forums) so that they can be alerted to potential disclosure issues. The LSE reminds companies, through their Nomads, that they must make it aware of significant rumours or problems relating to internet discussions which may impact on the orderly market in the securities.