A look at recent and proposed rule changes and cases which affect AIM companies.
Impact of AIM being a SME Growth Market
From 03 January 2018, the Markets in Financial Instrument Directive (MiFID2) has introduced a new designation of “SME Growth Market” that operators of qualifying markets can voluntarily apply for. AIM has been registered as a small and medium-sized enterprise (SME) Growth Market with effect from 03 January 2018.
As a result, minor consequential changes have been made to the AIM Rules for Companies, including the following changes to Rule 26 which requires AIM companies to maintain a website on which information should be available, free of charge. The changes require a company to keep the following information on its website for at least five years:
- any prospectus an AIM company has published
- annual financial reports and half yearly financial reports, and
- regulatory notifications made public containing inside information for the purposes of the Market Abuse Regulation (MAR).
See AIM Notice 48 and the consequential changes.
As AIM is now an SME growth market, AIM companies can take advantage of the exemption (under Article 18(6) of MAR) from drawing up an insider list on the usual basis, provided that the company:
- takes all reasonable steps to ensure that any person with access to inside information acknowledges the legal and regulatory duties and is aware of the sanctions applicable to insider dealing and unlawful disclosure of inside information, and
- is able to provide the FCA (or other competent authority) with an insider list upon request.
There is also a different prescribed form of insider list to be used by SME Growth Market issuers should they be requested to provide this to the regulator.
Whilst this change would appear to reduce the administrative burden for AIM companies, they will still have to have systems and processes in place to produce insider lists in the required form should these be requested by the regulator and it seems simpler for companies to continue producing insider lists as they go along.
AIM company fined for late disclosure of inside information under MAR
The Financial Conduct Authority (FCA) has fined Tejoori Limited (Tejoori) £70,000 for failing to disclose inside information as required by Article 17(1) of MAR. This is the first financial penalty imposed by the FCA on an AIM company for non-compliance with MAR and also its first enforcement action of any sort under MAR.
What is interesting about this case is that the obligation to disclose arose at an intermediate stage in a protracted process, when the draft notice which required Tejoori to sell its shares (drag along notice) and share purchase agreement (SPA) were sent on 12 July 2016 and that, by virtue of its previously announced valuation, Tejoori could not have delayed disclosure because to do so would have misled the public.
The FCA notice states that, although the drag along notice and SPA had not yet been signed, Tejoori was nonetheless in the possession of inside information regarding its shareholding in BEKON. As that information was materially different from Tejoori’s previous public announcement regarding its valuation of its shareholding in BEKON on 05 February 2016, it would not have been permissible for Tejoori to have delayed disclosure to the public pursuant to Article 17(4) of MAR.
Had Tejoori complied with its MAR obligations, this would have required it to have disclosed the potential transaction before BEKON and its purchaser had done so.
See the FCA final notice and “AIM company fined for late disclosure of inside information under MAR” for a more detailed overview of the case.
Proposed AIM Rule changes - feedback and consultation
On 11 December 2017, the London Stock Exchange plc (Exchange) published AIM Notice 49 and its feedback statement and further consultation on rule changes in response to the discussion paper published on 11 July 2017.
The Exchange is consulting on the following rule changes proposed in its discussion paper:
- formalising an early notification process for nominated advisers
- providing guidance to nominated advisers on appropriateness considerations, and
- requiring AIM companies to comply or explain against a recognised corporate governance code.
The Exchange is not taking forward the changes for:
- prescriptive criteria for the float
- a minimum fund raise on admission, or
- automatic fines for certain breaches of the AIM Rules.
Responses to the consultation are due by 29 January 2018.
For a more detailed overview of the proposed changes see our article “Proposed AIM Rule changes: feedback and consultation”.
This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.