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A B C D E F G H I J K L M N O P R S T V W Y

AIM High

A regular update on AIM news and developments. AIM High is designed to provide useful information and advice to anyone who has an involvement with or an interest in AIM, including officers of AIM-listed companies, companies who may be considering listing on AIM, NOMADs and brokers and individuals looking for non-executive directorships.

Latest Issue

In the latest issue of AIM High we look at the current state of the IPO market and how ambitious companies considering an IPO can take a range of actions now to prepare themselves. We also look at the benefits of board diversity, the recent FPC Corporate Reporting Annual Review and our regular look at AIM market statistics. Finally, our tax expert Mark Whiteside, outlines the key tax changes for businesses that were announced in the Autumn Statement, which you can read here.

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IPO slowdown – a time to prepare

Tuesday 13th December 2016

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AIM High - Issue 15

Even prior to the Brexit vote 2016 was a challenging year for IPO activity. This does not mean that companies considering an IPO should simply wait until the conditions improve.
 
It is likely that an already volatile market, which has seen a number of IPOs, such as Pure Gym, being pulled or only getting away with reduced valuations, will take further time to settle as participants try to interpret the consequences of the Brexit and US presidential votes.
 
To remain in control of their options when the IPO market comes back, ambitious companies should take steps in the current period which enable them to capitalise on a change in conditions.
 
Actions to take now include:
 
  • Consider the fundraising alternatives to an IPO. As it is difficult to predict when the IPO window will re-open, if short term access to cash dominates the thinking behind an IPO process, alternative funding options should be considered; 
  • If IPO remains the best option, use the time to: 
  1. Put good corporate governance and internal controls in place ready to comply with future disclosure obligations;
     
  2. Address auditing and accounts issues, which can take time to get right;
     
  3. Maintain a focus on running the business so that the investment story is strong. In a challenging market, a demonstrably strong historic performance and a compelling investment story becomes of greater significance;
     
  4. Start to appoint an advisory team to assist with these preparations. 
If you would like further advice, or to discuss preparing a company for IPO, please contact David Bowcock or Andrew Millar. 
 
Head of Corporate, Manchester
Tel: 0161 836 8948
 
 
 
Partner, Corporate
Tel: 0161 836 8965

Board composition and the benefits of diversity

Tuesday 13th December 2016

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AIM High - Issue 15

AIM companies should start to fully embrace the benefits offered by increased board diversity. It helps to avoid group think, and a variety of viewpoints can help to drive commercial competitiveness.
 
If quoted companies do not address this corporate governance weakness, changes to governance codes are likely to be forthcoming. The current focus remains board composition, and it is a hot topic. 
 
The Prime Minister has raised the prospect of worker and consumer representation on company boards, albeit that such representation will not be forced on companies. 
 
The Business, Innovation and Skills Committee has published a Green Paper on corporate governance, including a focus on the composition of boardrooms, as well as executive pay. 
 
The Parker Review on ethnic diversity on boards was launched on 2 November 2016, and the Hampton-Alexander Review on gender balance in FTSE leadership has recently reported. Both are recommending minimum numbers of people of colour and women respectively on FTSE 350 boards.
 
Although companies on the main market of the London Stock Exchange are under the most scrutiny, if the proposals are adopted AIM companies can expect to become subject to similar requirements. 
 
However, rather than focussing solely on top line targets, companies should ensure that their succession planning identifies, develops and promotes candidates at all levels from a range of backgrounds. By developing a deep pool of talent companies can appoint the strongest possible people to all roles, from the board down, and appropriately reflect the importance of diversity to their business.
 
If you would like any advice regarding the matters outined above please contact David Bowcock or Andrew Millar. 
 
Head of Corporate, Manchester
Tel: 0161 836 8948
 
 
 
Partner, Corporate
Tel: 0161 836 8965

Financial reporting: FRC updates

Tuesday 13th December 2016

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AIM High - Issue 15

On 21 October 2016, the Financial Reporting Council (FRC) published its Corporate Reporting Annual Review for 2015/2016 based on the reports and accounts of listed companies for the year to 31 March 2016. 
 
The FRC made a number of observations, notably that compliance with the accounting framework, particularly by larger public companies, is generally good, and the introduction of the strategic report has improved the quality of narrative reporting. It did, however, highlight the need for further improvement, as not all companies provide sufficient balance. Failure to acknowledge when things have not gone so well, the excessive use of underlying profit figures or inappropriate use of alternative performance measures, each undermine the quality of corporate reporting. 
 
The FRC highlights nine characteristics of good corporate reporting which are relevant to all companies, whether or not they have chosen to apply the UK Corporate Governance Code. The characteristics include: 
 
  • Telling a single story, with the narrative at the front end consistent with the accounting information at the back end; 
     
  • Strategic reports that are clear and balanced, and which explain the company’s business model and set out its performance and position, good and bad; and
     
  • Risks and uncertainties’ sections which are confined to those that genuinely concern the board and are accompanied by a description of mitigating actions taken. 
The FRC had previously issued guidance to those involved in the preparation of annual reports, highlighting key issues and improvements it considers can be made to annual reports in the 2016 reporting season. 
 
  • The advice includes a reminder that the strategic report should be user-friendly, clear and concise. 
  • Companies are encouraged to consider a broad range of factors when determining principal risks and uncertainties facing the business and performing their analysis for the viability statement, such as cyber-risk, climate change and Brexit. The FRC expects increasingly company-specific disclosures on Brexit as the economic and political effects become more certain. 
     
  • Companies are encouraged to disclose why the selected period of assessment is appropriate for the particular circumstances of the company, what qualifications and assumptions were made, and how the underlying analysis was performed. 
     
  • The relationship between IFRS or UK GAAP measures and any alternative performance measures should be clearly explained.
     
  • Business model reporting should clearly explain how the company makes money and what differentiates it from its peers.
     
  • There should be a clear link between the business model and the revenue recognition policies to be disclosed.
     
  • Companies need to respond to increasing stakeholder scrutiny of tax strategies, including where they pay tax, and consider carefully whether they are sustainable and any material risks to which this gives rise are clearly described in the report and accounts.
     
  • Dividend disclosures should detail how dividend policies operate in practice and how these policies may be impacted by risks and capital management decisions facing the company.
     
  • Investors would like to see more informative reporting about specific actions taken by Audit Committees. 

If you would like any advice regarding the matters outined above please contact David Bowcock or Andrew Millar. 

Head of Corporate, Manchester
Tel: 0161 836 8948
 
 
 
Partner, Corporate
Tel: 0161 836 8965

Damned Lies and Statistics

Tuesday 13th December 2016

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AIM High - Issue 15

The number of companies on AIM dropped to 995 in October, the first time that it has fallen below 1,000 since November 2004. This is not necessarily a positive development for AIM, but the potential downside in part contributes to the continuing increase in the average market cap of AIM companies. 
 
The increase in the average market capital of AIM companies has been a continuing theme of recent months. Encouraged by generally smaller and weaker companies leaving the market, it is a trend that has accelerated since the Brexit referendum. A weakening sterling has seen share markets, including AIM, rally. During September average market cap reached £83 million. Although it remains in part a function of strong current share prices, it is also indicative of the increasing strength of companies on the market. 
 
A word of caution about overall market strength is provided by the slowdown in the number of recent IPOs. The fact that investors do not appear keen to invest in new equity despite the high levels at which existing equity is priced does bring into question the foundations of recent equity market strength.
 
However, further evidence of investor belief in the strength of current AIM companies is provided by increasing liquidity. September 2016 saw 627,000 trades worth in excess of £3.3 million. These figures are more than 20% higher than previous highs for a single month in 2015 or 2016. 
 
If you would like to discuss any AIM matters please contact either David Bowcock or Andrew Millar:
 
Head of Corporate, Manchester
Tel: 0161 836 8948
 
 
 
Partner, Corporate
Tel: 0161 836 8965

 


More Market Abuse Regulation

Tuesday 20th September 2016

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AIM High - Issue 14

The implementation of the Market Abuse Regulation (MAR) which took effect on 3 July 2016, continues to be the cause of numerous new regulations and guidance, of which AIM companies should be aware. Of particular significance:

Financial Services and Markets Act 2000 (Market Abuse) Regulations 2016

The Financial Services and Markets Act 2000 (Market Abuse) Regulations 2016 took effect on 3 July 2016, and make a number of amendments to the Financial Services and Markets Act 2000, (FSMA), and to other primary and secondary legislation, for the purposes of implementing the MAR. The new regulations differ in a number of respects from the draft version made available by HM Treasury between November 2015 and February 2016, notably they introduce: 

  • a new section 122G(3) FSMA 2000 under which the Financial Conduct Authority (FCA) may require an issuer to publish information or a corrective statement where the issuer has published false or misleading information, or give a false or misleading impression to the public, and the FCA considers that the publication of the information is necessary for the purpose of the exercise by it of functions under MAR;
     
  • a new section 131AD FSMA 2000, which addresses the issue of when, for the purposes of Article 8.5 (insider dealing) and Article 12.4 (market manipulation) of MAR, an individual participates in a decision by a body corporate. An individual does so participate if he is an officer of the body corporate when the decision is made and the FCA is satisfied that he was knowingly concerned in the decision;
     
  • a new section 131AE FSMA 2000, which makes it clear, for the purposes of any enactment, that a person contravenes Article 14 or Article 15 of MAR whether the contravention is by that person alone, jointly or in concert.

ICSA, GC100 and QCA guidance

On 24 June 2016, ICSA, GC100 and QCA jointly published a guidance note on the MAR. The guidance note contains a specimen: 

  • group-wide dealing policy, which is designed to introduce the concept of market abuse to all group employees and directors;
     
  • dealing code;
     
  • dealing procedures manual, for the company’s use. The schedules include pro forma notices where people are added to or removed from an insider list as well as guidance on employee share plans, awards and trusts.

The dealing code and procedures manual are intended to be used together and are based on the assumption that the company is incorporated in the UK with financial instruments admitted to trading.

All three documents are being submitted to the FCA and the London Stock Exchange for their review and comment.

AIM Regulation update

On 2 August 2016, AIM Regulation published an Inside AIM update confirming its position on the question of whether the 30-day closed period requirement under Article 19(11) of the MAR means that issuers that announce preliminary results need to impose closed periods before the announcement of preliminary results, before publication of the year-end report, or both.

AIM Regulation refers AIM companies to the European Securities and Markets Authority’s updated Q&A on the MAR which included a question on this matter which mirrors the approach of the FCA: the announcement of preliminary results will constitute the end-date of the closed period under the MAR, provided that the preliminary results contain all of the key financial information expected to be included in the year-end report. AIM Regulation does not propose to amend the AIM Rules but continues to support the use of Listing Rule 9.7A.1 (preliminary statement of annual results) by AIM companies as a benchmark in relation to the preparation of a preliminary results announcement.

AIM Regulation has also published some FAQs for AIM companies and their nominated advisers on the disclosure obligations within the MAR and the AIM Rules. The FAQs set out where to find various implementing technical standards for the MAR, how to notify delayed disclosure of inside information under the MAR and where to find more information on the MAR.

To find out more please contact either David Bowcock or Andrew Millar. 


David Bowcock

Head of Corporate, Manchester
Tel: 0161 836 8948
Email: david.bowcock@brabners.com





Andrew Millar

Partner, Corporate
Tel: 0161 836 8965
Email: andrew.millar@brabners.com


 


Corporate Culture and the Role of Boards

Tuesday 20th September 2016

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AIM High - Issue 14

The Financial Reporting Council (FRC) recently published a report on corporate culture and the role of boards, which considers the importance of culture in driving business performance, and considers the role of boards in helping to shape and embed a healthy corporate culture. The FRC’s mission is to promote high quality corporate governance and reporting to foster investment.

The report seeks to address how boards and executive management can steer corporate behaviour to create a culture that will deliver sustainable good performance. In doing so it focuses on the role of the board in shaping, monitoring and overseeing culture.

The FRC’s report made the following key observations:

  • Recognise the Value of Culture. A healthy corporate culture is vital to the creation and protection of long-term value. The board’s role includes determining the company's purpose, and ensuring it is aligned with the company's values, strategy and business model. Directors should not wait for a crisis before they focus on company culture.
     
  • Align Values and Incentives. Recruitment, performance management and reward should support and encourage behaviours consistent with the company’s purpose, values, strategy and business model. The board is responsible for explaining this alignment to shareholders, employees and other stakeholders.
     
  • Demonstrate Leadership. A company's leaders, particularly its chief executive, must embody the desired culture and embed this across all levels and aspects of the business. Boards have a responsibility to act where leaders do not deliver.
     
  • Embed and Integrate. The company's values should inform the behaviours that are expected of all employees and suppliers. Human resources, internal audit, ethics, compliance and risk functions should be empowered and resourced to embed values and assess culture effectively. Their voice in the boardroom should be strengthened.
     
  • Assess, Measure and Engage. Boards should give careful thought and devote sufficient resource to how culture is assessed and reported on. The indicators and measures that are used should be aligned to desired outcomes and material to the business. The board has a responsibility to understand behaviour throughout the company and to challenge where it finds misalignment with values or where better information is required.
     
  • Exercise Stewardship. Effective stewardship should include engagement about culture and encourage better reporting. Investors should challenge themselves about the company behaviours they are encouraging and to reflect on their own culture.
     
  • Be Open and Accountable. Openness and accountability matter at every level. Good governance means a focus on how this takes place throughout the company and those who act on its behalf. It should be demonstrated in the way the company conducts business and engages with and reports to stakeholders. This involves respecting a wide range of stakeholder interests.

Need advice or wish to talk to us?

For further information about corporate culture please contact either David Bowcock or Andrew Millar:


David Bowcock

Head of Corporate, Manchester
Tel: 0161 836 8948
Email: david.bowcock@brabners.com





Andrew Millar

Partner, Corporate
Tel: 0161 836 8965
Email: andrew.millar@brabners.com

 


AIM Rules update

Tuesday 20th September 2016

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AIM High - Issue 14

The implementation of the Market Abuse Regulation (MAR) has prompted changes to the AIM Rules, something confined in AIM Notice 45. In the main the changes to the AIM Rules are as proposed in AIM Notice 44, save that:

  • The definition of applicable employee has been amended. An applicable employee for the purposes of Rule 21 (Dealing policy) is any employee of the AIM company, its subsidiary or parent undertaking who, other than a director, is a “person discharging managerial responsibilities” as defined in Article 3(25) of MAR.
     
  • The Guidance to Rule 21 has been amended to specify that the London Stock Exchange would expect an AIM company to appoint an individual of sufficient seniority (rather than independent staff of sufficient seniority) to grant a clearance to deal request.

Consequential changes are being made to Schedule One (Independence in relation to Rule 21) and Schedule Three (Nominated adviser responsibilities – Admission responsibilities) of the AIM Rules for Nominated Advisers and paragraph 5.1 of the AIM Note for Investing Companies.

To find out more please contact either David Bowcock or Andrew Millar. 


David Bowcock

Head of Corporate, Manchester
Tel: 0161 836 8948
Email: david.bowcock@brabners.com





Andrew Millar

Partner, Corporate
Tel: 0161 836 8965
Email: andrew.millar@brabners.com

 

 


Damned lies and statistics – Brexit

Tuesday 20th September 2016

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AIM High - Issue 14

The fallout from the EU referendum vote has dominated the summer. It has also impacted on AIM, although not necessarily as was expected in the immediate aftermath of the vote.

Following initial falls in the value of AIM shares (the AIM All Share Index fell by over 7% two trading days after the result) there has since been a recovery. Two months after the decision to leave the AIM All Share Index was nearly 9% higher than the day of the vote. The AIM UK50 and AIM 100 indexes of larger companies rose even further.

The rise can partly be explained by the devaluation of sterling but it had been thought that the fall in the value of the currency would help larger companies, especially those with overseas earnings rather than the traditional constituents of AIM. It will be interesting to observe how prices hold up as more details about Brexit emerge and filter into the wider economy.

The other point of note is that year on year trading volume on AIM has increased following the EU referendum. Probably unsurprisingly the day after the vote (and day of announcement of the result, 24 June) recorded 37,688 trades, the highest number in the previous two years. The increased volume continued throughout the summer, and the increasing prices indicates that not all trades are attributable to a move to perceived safe sectors or stocks.

To find out more please contact either David Bowcock or Andrew Millar. 


David Bowcock

Head of Corporate, Manchester
Tel: 0161 836 8948
Email: david.bowcock@brabners.com





Andrew Millar

Partner, Corporate
Tel: 0161 836 8965
Email: andrew.millar@brabners.com

 

The Market Abuse Regulation – the impact for AIM companies

Friday 27th May 2016

Introduction

The Market Abuse Regulation (MAR) takes effect from 3 July 2016. MAR applies to financial instruments admitted to all EEA “unilateral trading facilities”, which includes AIM. 

The new regime will involve a number of significant changes for AIM companies, requiring them to update their internal procedures and requirements. 
 
The main practical issues for AIM companies are: 
 
  • The Financial Conduct Authority (FCA) is to become the designated regulator under MAR. 
     
  • Additional rules around disclosure of inside information to the market. 
     
  • A new requirement to keep insider lists. 
     
  • The introduction of a new mandatory closed period. 

FCA as additional regulator

The FCA is to be the designated regulator under MAR for all UK based trading facilities and so will be their prime regulator (including for AIM companies). This will lead to AIM companies having obligations to both AIM Regulation and the FCA. 
 
In an attempt to avoid undue duplication, AIM Regulation has proposed changes to certain AIM Rules for Companies (AIM Rules) (see AIM Notice 44). It also intends to issue further guidance through Inside AIM and to maintain a “frequently asked questions” section on its website. However, notwithstanding how closely AIM Regulation and the FCA work together to co-ordinate their approach and minimise duplication of activities, 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.


Disclosure of inside information to the market

MAR will require AIM companies to disclose inside information to the market as soon as possible, with delay only permitted in limited circumstances. “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”. 
 
This obligation is similar to the general disclosure requirement which currently applies to AIM companies under AIM Rule 11 (which will be retained, albeit with revised guidance notes to clarify that compliance with MAR does not mean an AIM company will have met its obligations under the AIM Rules, and vice versa), but it is not identical and there are some significant additional requirements that apply under MAR. 
 
Changes from the current regime
 
Two of the most significant differences for AIM companies under MAR will relate to situations where a decision is taken to delay the disclosure of inside information. 
 
  • Detailed record keeping will be required where disclosure is delayed. Information should include (amongst other things) the time and date when the decision to delay was made, the persons responsible for deciding to delay and for ongoing monitoring of the delay and evidence (and explanation) of the fulfilment of the conditions permitting delay (i.e. (i) delay on the basis of avoiding prejudice of the Company’s legitimate interests; or (ii) delay not likely to mislead the public; or (iii) the company could ensure confidentiality of the information). In this context, companies should consider whether it might be appropriate (if they do not already do so) for the board to delegate responsibility for decisions regarding inside information and disclosure to a committee.
     
  • A requirement to notify the FCA (on request), at the time the relevant information is disclosed to the market, that disclosure was delayed. To ensure its ability to comply with a request from the FCA, all AIM companies will need to document the reasons for delayed disclosure at the time of the delay (see previous bullet point). 
AIM companies will also need to comply with the MAR requirement to post publicly disclosed inside information on their website for a period of at least five years. 


Insider Lists

Under MAR, the requirement to maintain insider lists (which currently only applies to Main Market issuers) will be extended to apply to AIM companies. The MAR obligations are more extensive than previously required for Main Market issuers, although from January 2018 a slight relaxation to the new rules on insider lists will apply for companies on “SME growth markets”. 
 
AIM companies are entitled to hope that AIM Regulation will apply for AIM to become a designed “SME growth market”. However, until then they must ensure compliance with the full regime. 
 
Initial requirement
 
The initial requirement is that issuers or any person acting on their behalf or on their account must:
 
  • Draw up an insider list of all persons who have access to inside information and who are working for them under a contract of employment, or otherwise performing tasks through which they have access to inside information, such as advisers, accountants or credit rating agencies. Where another person acting on behalf, or on the account, of the issuer assumes the task of drawing up and updating the insider list, the issuer remains fully responsible for complying with MAR, and must always retain a right of access to the insider list. 
     
  • Promptly update the insider list where:
  • there is a change in the reason for including a person already on the insider list; 
  • there is a new person who has access to inside information and needs to be added to the insider list; and 
  • a person ceases to have access to inside information. 

Each update must specify the date and time when the change triggering the update occurred. 

  • Provide the insider list to the FCA as soon as possible upon its request. 
     
  • Take all reasonable steps to ensure that any individuals added to insider lists acknowledge their legal and regulatory duties and are aware of the sanctions for insider dealing/improper disclosure of inside information. 
Content
 
As a minimum, an insider list must include:
 
  • The identity of any person having access to inside information.
     
  • The reason for including that person on the insider list. 
     
  • The date and time at which that person obtained access to inside information.
     
  • The date on which the insider list was drawn up. 
MAR envisages that companies will be able (if they want) to keep their insider lists in two sections – one which contains deal or event specific lists and another which sets out the company’s so-called “permanent” insiders, being people who (if inside information exists within the company) would have access to it. 


Dealings by persons discharging managerial responsibilities (PDMRs)

MAR will introduce:
 
  • Detailed disclosure obligations in relation to conducting “transactions on own account” by PDMRs (being, a person within an issuer who is (i) a member of the administrative, management or supervisory body of that entity; or (ii) a senior executive who is not a member of any of these bodies who has regular access to inside information relating directly or indirectly to that entity and power to take managerial decisions affecting the future developments and business prospects of that entity) and their “closely associated persons” (similar to the current AIM Rule definition of a director’s family); and 
     
  • restrictions on PDMRs dealing during a “closed period” of 30 days prior to annual and interim results announcements. The FCA has advised that, pending clarification from the European Commission, it will treat the closed period as running prior to any preliminary results announcement, where such announcement contains all of the inside information expected to be in the year end report. The new closed period is shorter than the two month period currently provided for under the AIM Rules and, unlike the AIM Rules definition, does not extend to other periods when the AIM company is in possession of unpublished price sensitive information.
The scope of the dealings to which the MAR disclosure obligations will apply and the new closed period definition has led AIM Regulation to propose deleting AIM Rule 21, together with the associated definitions of “deal” and “unpublished price sensitive information”. A new rule would be introduced requiring AIM companies to have a dealing policy in place. Such policies must be reasonable and effective, set out the requirements and procedures for dealing by PDMRs and comply with specific minimum provisions to be set out in the new AIM Rule 21. 
 
In addition to the detailed requirements that the new rule will contain, the notes will provide more generally that, in determining whether it is appropriate to give clearance to deal, there is an expectation that AIM companies will consider their wider obligations under MAR. AIM Regulation will also expect companies to appoint independent staff of sufficient seniority to grant clearance requests and that the procedures should give consideration as to an alternate person where they are not independent in relation to a particular request. 
 
Although most AIM companies will have share dealing codes in place, these will need to be reviewed for compliance with the revised AIM Rules and also to ensure they are aligned with the relevant provisions of MAR. AIM Regulation has indicated that it will expect existing AIM companies to update their policies to ensure compliance with new AIM Rule 21 by 3 July 2016. 


Disclosure

The MAR regime in respect of disclosure of dealings for directors will differ from the current regime under AIM Rule 17 in certain respects, in particular:
 
  • The MAR restrictions apply to all PDMRs (not just to directors), which means that their application may be broader than AIM Rule 17.
     
  • AIM Rule 17 currently requires disclosure of all dealings, whereas MAR includes a de minimis threshold below which transactions will not require disclosure. This is set at €5,000 per calendar year (which should be calculated without netting of transactions).
     
  • Disclosure under MAR (by the PDMR to the company and the FCA, and by the company to the market) must be made in the form of a mandated template. 
To avoid undue duplication, AIM Regulation has proposed the deletion of AIM Rule 17 insofar as it relates to disclosure of directors’ dealings on the basis that MAR provides an appropriate level of transparency. It will be interesting to see the impact of MAR, applying as it does to a wider group of persons, but in respect of potentially fewer transactions (because of the de minimis threshold).


Steps for AIM companies to consider

Disclosure of inside information

AIM companies should consider what steps they need to take to ensure their compliance with MAR. In a number of cases that will mean small changes to current practice, although other obligations may require the implementation of new processes. 

Disclosure committee
  • Consider the need for the company to have a disclosure committee, if one is not in place. 
  • The Board should ensure there is clarity on who is responsible for taking/has authority to take decisions around disclosure (in particular to delay disclosure). 
Procedures 
  • Review existing procedures for consistency with MAR and establish formalised documented processes. 
Record keeping
  • Put in place templates for recording decisions taken in relation to inside information (in particular decisions to delay disclosure). 
Interaction with FCA
  • Identify the appropriate person to take responsibility for liaising with the FCA. 
     
  • Agree a process with Nomad to ensure appropriate interaction with the FCA and AIM Regulation and compliance with MAR and AIM Rules. 
Website
  • Review website for compliance with MAR requirements regarding disclosure of inside information; notably the requirement for publicly disclosed inside information to be included on the website for at least five years. 
Insider lists  
“Permanent” insiders
  • Determine whether company should maintain a permanent insider list. 
     
  • As appropriate, identify a list of “permanent” insiders and others likely to have regular access to inside information, together with the necessary information in relation to these individuals. 
Existing transactions etc. 
  • Identify any transactions (existing or to be commenced) constituting inside information prior to July 2016. 
  • Identify individuals involved in those transactions. 
Existing systems and controls
  • Consider how best to gather information for insider lists and integrate such information into existing systems and procedures. 
     
  • Ensure “written” acknowledgement of duties/ obligations is given by all persons added to insider lists. 
     
  • Identify any specific or additional consents required in particular jurisdictions under data protection or similar legislation.
Director/PDMR dealings  
PDMR list
  • Consider which non-directors should be treated as PDMRs. 
PDMRs/CAPs
  • Brief directors and other PDMRs on revised regime and key changes. 
     
  • Work with PDMRs to identify their “closely associated persons”. 
     
  • Ask PDMRs to review their existing arrangements (and those of their close associated persons) to identify any potentially problematic areas that require further review/ analysis. 
Share dealing code
  • Consider terms of new share dealing code once scope of new AIM Rule 21 is clear. 

This note provides an overview of the key changes that MAR will bring. For further information about how MAR will impact on your systems and controls, please contact either David Bowcock or Andrew Millar. 

Head of Corporate, Manchester
Tel: 0161 836 8948
 
 
 
Partner, Corporate
Tel: 0161 836 8965
 

 


The Market Abuse Regulations - changes to share dealing rules and other changes to AIM Rules for Companies

Friday 13th May 2016

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AIM High - Issue 13

AIM Notice 44, which was issued by the London Stock Exchange (Exchange) on 13 April 2016, is a consultation on proposed changes to the AIM Rules for Companies ahead of the Market Abuse Regulation (MAR) coming into force. The proposed new AIM Rules for Companies can be accessed here
 
The Exchange has subsequently (on 29 April 2016) issued an Inside AIM giving further guidance, based on the assumption that the changes (described below) set out in AIM Notice 44 are implemented. 
 
AIM Rule 21
 
The key proposal is the deletion of existing AIM Rule 21 (Restrictions on deals) and replacing it with new AIM Rule 21 (Dealing policy) to ensure compliance with Article 19 of MAR. The new rule will require AIM companies to have a reasonable and effective dealing policy in place from admission. Existing companies would be expected to update their existing policies to comply with the new rule by 3 July 2016. 
 
The purpose of AIM Rule 21 is to restrict directors and those close to the AIM company taking advantage of information received as a result of their position and thereby reduce any perception that they are able to do so. MAR will provide a legal prohibition on trading during close periods (and prescribe mandatory close period rules) and exemptions to those prohibitions, it is therefore proposed to remove the existing provision of AIM Rule 21 along with the associated definitions of “deal” and “unpublished price sensitive information” contained in the glossary.
 
The new rule will require an AIM company to have a dealing policy. The Exchange does not intend to prescribe the detailed content of the dealing policy but proposes instead to set out the minimum provisions that it would expect to be included in the policy. AIM companies (and their Nomads) are expected to design and implement the policy in a meaningful way. AIM companies should note that the AIM Rule 21 obligation is separate to their compliance with Article 19 of MAR, and compliance with one does not automatically mean compliance with the other obligation. 
 
Other key proposals
 
  • Amending the guidance note to AIM Rule 11 (General disclosure of price sensitive information) to clarify the purpose of the rule and to make it clear that, as the Exchange does not plan to amend AIM Rule 11, an AIM company will be subject both to AIM Rule 11 and to Article 17 of MAR. 

    In particular, the Exchange notes that the disclosure of “inside information” pursuant to the MAR is based on a specific definition, whereas the consideration of AIM Rule 11 by an AIM company and its Nomad is a principles based consideration in the context of a maintenance of a fair and orderly market. Compliance with one rule will not automatically mean the other rule is satisfied, but the Exchange believes that their existing compliance with AIM Rule 17 should enable companies to transition to the new obligations under MAR. However, a failure by an AIM company to comply with AIM Rule 11 or to seek the advice and guidance of its Nomad will be regarded as a serious breach of the AIM Rules for Companies. The Financial Conduct Authority is the competent authority for the MAR.
     
  • Deleting, from the list of information in AIM Rule 17 (Disclosure of miscellaneous information) that an AIM company must notify without delay, information relating to directors’ dealings. The Exchange is satisfied that Article 19 of MAR provides an appropriate level of transparency. 
     
  • Clarifying the circumstances in which the Exchange might waive the need for shareholder approval to a cancellation of AIM Securities under AIM Rule 41 (Cancellation), where those securities are already, or will be, admitted to trading on an EU regulated market or an AIM Designated Market. 
Insider lists
 
As reported in Issue 12, following implementation of the MAR, all AIM companies will be required to maintain a list of all those persons working for them that have inside information. AIM companies will need to implement systems and controls to comply with these obligations.
 
Need advice or wish to talk to us?
 
For further information about the Market Abuse Regulations or any of the changes to the AIM Rules for Companies, please contact either David Bowcock or Andrew Millar:
 
Head of Corporate, Manchester
Tel: 0161 836 8948
 
 
 
Partner, Corporate
Tel: 0161 836 8965
 

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