While the Market Abuse Regulation (596/2014/EU) (MAR) does not come into force until 3 July this year, AIM companies need to start preparing now in anticipation of the changes which MAR will be bringing in, with a view to updating their internal procedures and requirements.
Whereas the Market Abuse Directive (MAD) applies only to financial instruments admitted to trading on 'regulated markets' (and therefore not AIM), MAR will apply to financial instruments admitted to all EEA 'multilateral trading facilities' which includes AIM.
Significant prospective changes for AIM companies include:-
- the regime regarding disclosure of price sensitive information,
- the FCA becoming an additional regulator,
- a new 'insider lists' obligation (at least in the short term as from 3 July 2016),
- an extended disclosure requirement to include 'persons discharging management responsibilities' (PDMRs); and
- a different 'close period'.
FCA as additional regulator
The Financial Conduct Authority (FCA) is to be the designated regulator under MAR as regards all UK based trading facilities and so will be the prime regulator (including for AIM companies).
Disclosure of price sensitive information
AIM Rule 11 currently sets out the obligation on AIM companies to disclose 'price sensitive information'. While the FCA's proposed approach to MAR implementation for fully listed companies is:-
- to delete provisions in the Disclosure Rules and Transparency Rules (DTRs) and the Listing Rules where MAR either contains an equivalent provision (signposting the relevant provision in MAR) or the current provision is incompatible with MAR; and
- to retain existing guidance that is compatible with the MAR,
the London Stock Exchange's current thoughts in respect of the 'AIM Rules for Companies' are that MAR should sit alongside AIM Rule 11 (either as currently worded or with minor amendments). This is on the basis that the London Stock Exchange considers that retaining a disclosure rule in the AIM Rules for Companies is "important to the integrity of AIM and the maintenance of an orderly market".
On this basis, AIM companies will have obligations to both AIM Regulation and the FCA, and the London Stock Exchange envisages that any disclosure issues would be discussed first with AIM Regulation and the Nomad, with AIM Regulation co-ordinating with the FCA "as necessary". However, as noted by the London Stock Exchange, only the FCA, as the competent authority under MAR, will be able to opine on MAR compliance and will retain the right to engage directly with an AIM company, if necessary.
The disclosure obligation under MAR will be to inform the public as soon as possible of inside information which directly concerns the issuer. 'Inside information' is defined as "information of a precise nature relating directly or indirectly to one or more issuers or to one or more financial instruments which, if made public, would be likely to have a significant effect on the price of those financial instruments or the price of related derivative financial instruments".
AIM Rule 11 is worded slightly differently and refers to "any new developments which are not public knowledge which, if made public, would be likely to lead to a significant movement in the price of its AIM securities", but this may be a matter of semantics.
Both MAR and the Guidance Notes to AIM Rule 11 permit delay in disclosure. MAR permits this "at the issuer's own responsibility" where:-
- immediate disclosure is likely to prejudice the legitimate interests of the issuer;
- delay of the disclosure is not likely to mislead the public; and
- the issuer is able to ensure the confidentiality of that information.
Where an issuer has delayed the disclosure of inside information under these conditions, MAR will requires that it must inform its competent authority (i.e. the FCA) about the delay and provide a written explanation of how the conditions were met as soon as the information is disclosed to the public. The competent authority has the option to require disclosure only upon request and the FCA's current position is that it is proposing to require an explanation only upon its request. However, all AIM companies will need to document the reasons for delayed disclosure at the time of the delay, in case they are requested to provide the explanation at short notice.
Under MAR, AIM companies will also be required to keep and update 'insider lists' containing the detailed information on each individual on that insider list set out in the ESMA template in ESMA's Final Report on technical standards on MAR published on 28 September 2015 (ESMA/2015/1455). Fully listed companies have been under an obligation to keep 'insider lists' under MAD for some time now, but the details required by MAR (as from 3 July 2016 for both fully listed and AIM companies) are much more extensive.
The requirement for AIM companies to keep 'insider lists' in the more extensive form required by MAR may only be temporary however. Article 18(6) of MAR provides an exemption (although not from keeping insider lists altogether) for issuers whose financial instruments are admitted to trading on an 'SME growth market'. AIM companies are entitled to hope that AIM Regulation will apply for AIM to become a designated 'SME growth market'.
However, that term is only defined in the amended Markets in Financial Instruments Directive (2014/65/EU) (MiFID II) which itself does not come into effect until 3 January 2017 (six months after MAR come into effect and it is looking likely that it will be delayed beyond that). At the very least therefore, AIM companies are going to have to comply with the much more extensive 'insider list' requirements for six months - and potentially longer.
Transactions by PDMRs
MAR also sets out the form and content of disclosure of transactions by 'persons discharging management responsibilities' (PDMRs), the template for which disclosure is set out in ESMA's Final Report on technical standards referred to above. MAR introduces a de minimis threshold of €5,000 within a calendar year below which transactions need not be notified is to be introduced by MAR, which threshold may, at the option of the FCA be increased to €20,000.
The London Stock Exchange has not as yet given any indication as to what amendments it is considering in relation to AIM Rule 17 and Schedule Five to the 'AIM Rules for Companies' as a result.
MAR will impose a mandatory 'close period' of 30 calendar days before the announcement of an interim financial report or a year-end report which the issuer is obliged to make public, during which PDMRs are not permitted to deal, subject to very limited exceptions and with the issuer's approval.
Again, the London Stock Exchange has not as yet given any indication as to how it will amend the definition of "close period" in the AIM Rules for Companies, but that seems necessary given that the current two month 'close period' in the AIM Rules for Companies will otherwise directly conflict with MAR.
Last updated 27 January 2016