The Market Abuse Regulation and AIM companies

The EU Market Abuse Regulation (2014/596/EU) (MAR) which came into force on 3 July 2016 was introduced to harmonise EU-wide market abuse regimes and aims to enhance market integrity and investor protection. MAR applies to AIM companies, which must ensure compliance with new rules on disclosure of inside information, insider lists and disclosure of dealings by persons discharging managerial responsibilities (PDMRs) (which includes directors) and persons closely associated with them.

AIM companies need to understand how MAR applies to them and ensure that they have the necessary policies and procedures to ensure compliance with MAR.

What are the key considerations for AIM companies?

The key considerations are:

• the management and disclosure of inside information
• a new requirement for the maintenance of insider lists
• an amended regime for the notification of PDMR dealings
• new mandatory close period rules

Inside information

‘Inside information’ (Article 7 of MAR) is:

Information of a precise nature, which has not been made public, relating, directly or indirectly, to one or more issuers or to one or more financial instruments; and which, if it were made public, would be likely to have a significant effect on the prices of those financial instruments or on the price of related derivative financial instruments.

AIM Rule 11 requires AIM companies to publish price sensitive information without delay but MAR introduced additional obligations to disclose inside information to the market.

This is an overlap between the AIM Rules and MAR but the AIM Rules confirm that compliance with one does not automatically satisfy the obligations under the other, so AIM companies should ensure they are compliant with AIM Rules and with MAR at all times.

For the purposes of MAR, AIM companies must ensure that:

• any announcement of inside information includes certain specified information
• inside information is published on a dedicated section of the relevant AIM company’s website, set out in chronological order and kept there for a period of five years
• detailed records are kept of any decision to delay disclosure of inside information (as any delay has to be reported to the competent authority and, if required, a written explanation of the reasons for the delay has to be provided)

The key differences for AIM companies under MAR arise where an issuer has decided to delay the disclosure of inside information. Where disclosure is delayed, the following is required:

• a detailed record documenting the reason and nature of the delay – including, amongst other things, the time when the information first existed, and date when the decision to delay was made, the persons responsible for deciding to delay
• ongoing monitoring of the delay, justification for the delay and when the information is likely to be disclosed
• notification to the FCA, at the time the relevant information is disclosed to the market, that disclosure was delayed and, if requested by the FCA, written details of the circumstances relating to the delay

Insider lists

MAR has introduced a new requirement for AIM companies to maintain ‘insider lists’ which set out details of those people (including an issuer’s employees and advisors) who have access to inside information and copies of which the FCA can request at any time.

MAR also requires companies to take all reasonable steps to ensure that any individuals added to insider lists acknowledge their legal and regulatory duties in relation to inside information and are aware of the sanctions for insider dealing/improper disclosure of inside information.

It is worth noting that under MAR, companies on SME growth markets are not required to maintain insider lists, but that this exception will only take effect from January 2018 and all AIM companies should ensure compliance in the interim.

PDMR dealings

The MAR rules have replaced and widened directors’ obligations to disclose dealings previously set out in AIM Rule 17. In particular, AIM companies should note that:

• the MAR restrictions apply to all PDMRs (not just to directors)
• MAR has introduced a de minimis threshold of €5,000 per calendar year (to be calculated, without netting, on all transactions referred to in Article 19(1) of MAR) below which transactions will not require disclosure
• disclosure under MAR (by the PDMR and by the company itself) must be made in a prescribed format

Mandatory close period

MAR has imposed 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.

Share dealing policy

AIM Rule 21 has been revised to bring it in line with MAR and the new Rule requires AIM companies to have in place an effective dealing policy setting out the procedures and requirements for directors and applicable employees. AIM Regulation does not prescribe the detailed content of the dealing policy but it does set out the minimum provisions to be adopted.  While most AIM companies will have a dealing code in place, it should be reviewed in conjunction with the revised AIM Rules to ensure that it is compliant and aligned with MAR.

In the absence of a ‘model policy’ from the London Stock Exchange, the Quoted Companies Alliance, ICSA and GC100, has produced a pro-forma MAR compliant dealing code and a dealing procedures manual since all existing AIM companies were required to have a dealing policy in place by 3 July 2016. Many companies have adopted this pro-forma code, at least as an interim measure, to ensure compliance whilst considering a more ‘tailor-made’ policy (since AIM Notice 45 stated that the policy should be considered in a meaningful way and take into account the company’s needs rather than be a ‘boilerplate’ template).

Finally, nominated advisers must be satisfied that the AIM company has an appropriate share dealing policy in place to comply with AIM Rule 21 (AR5 of Schedule 3 to the AIM rules for nominated advisers) though this is hampered by the absence of guidance on what the LSE considers to be a reasonable and effective share dealing policy.