The London Stock Exchange issued a disciplinary notice on 16 July 2008 stating that, in the six months preceding the notice, four AIM companies had been privately censured and fined for various breaches of the AIM Rules for Companies. The private censures and fines totalling £170,000 were for breaches of the following AIM Rules:
- AIM Rule 3 & Schedule Two, paragraph (k) – which provides that the admission document must disclose any information which the company reasonably considers necessary to enable investors to form a full understanding of (i) the assets and liabilities, financial position, profits and losses, and prospects of the company and its securities; (ii) the rights attaching to those securities; and (iii) any other matter contained in the admission document.
- AIM Rule 10 – which provides that an AIM company must take reasonable care to ensure that information notified by it is not misleading, false or deceptive and does not omit anything likely to affect the import of such information.
- AIM Rule 11 – which provides that an AIM company must issue notification without delay of any new developments which are not public knowledge concerning a change in (amongst other things) its expectation of its performance which, if made public, would be likely to lead to a substantial movement in the price of its shares.
- AIM Rule 17 – which provides that an AIM company issue a notification without delay of (amongst other things) any material change between its actual trading performance or financial condition and any profit forecast, estimate or projection made public by the company.
- AIM Rule 31 – which provides (amongst other things) that an AIM company must seek advice from its nominated adviser regarding compliance with the AIM Rules whenever appropriate and take that advice into account.
In its disciplinary notice, the LSE highlighted a number of points arising from these disciplinary actions, including:
- Forward-looking statements: forward-looking statements notified to the market may be misleading to investors in the absence of adequate explanations as to the assumptions on which those forward-looking statements are based and the risks associated with them. Information not false, misleading or deceptive: notwithstanding the obligation on companies to release price sensitive information without delay, the AIM Rules also require reasonable care be taken in order to ensure that information released is not misleading, false or deceptive.
- Postponing disclosure of price sensitive information: while the AIM Rules legitimately allow delaying disclosure of information in certain circumstances, postponing disclosure of a negative trading update in the belief that trading performance may improve in the short term and/or that the company will shortly be in a position to announce other positive news at the same time are not legitimate reasons for delaying disclosure under the AIM Rules.
- Disclosure requirements and previous notifications: when considering a company's disclosure requirements, a company and its advisers must take into account information previously notified to the market.
- Admission documents: a company and its advisers must consider carefully any matters relating to admission which may not fall within specific disclosure requirements but which may nonetheless be relevant to investors and potentially fall to be disclosed under paragraph (k) of Schedule Two of the AIM Rules.
To view the LSE disciplinary notice, please click here (4 page pdf)