AIM was registered as an SME Growth Market on 3 January 2018. Article 33 of the EU Directive on markets in financial instruments 2014/65/EU (MiFID II) provides that operators of qualifying markets may apply to their home competent authority to have the market registered as an 'SME Growth Market'. On 5 December 2017 the London Stock Exchange (LSE), as the operator of AIM, the largest market for small and medium sized growth companies in the EU, applied to the Financial Conduct Authority (FCA) for AIM to be registered as an SME Growth Market and this took effect on 3 January, coinciding with the MiFiD II implementation date.
The SME Growth Market designation has been developed by the European Commission as part of its capital markets union plan, to create a bespoke regulatory framework for European growth markets. LSE believes that the new categorisation will enable future legislative changes to be structured so that they cater to the needs of the users of SME Growth Markets.
The designation is also expected to raise the profile and visibility of SME Growth Markets across the EU and distinguish them from multilateral trading facilities (MTFs), which generally operate as trading facilities that do not have a primary market function.
Minor consequential changes to the AIM rules for companies
Some minor amendments to the AIM Rules have been made in consequence of the designation. AIM Rule 26 (Company information disclosure) requires AIM companies to maintain a website on which specified information should be available, free of charge. Prior to the amendments, the specified information included:
- An AIM company's most recent admission document together with any circulars or similar publications sent to shareholders within the past 12 months
- The annual accounts published pursuant to AIM Rule 19 for the last three years or since admission, whichever is the lesser, and all half yearly, quarterly or similar reports published since the last annual accounts pursuant to AIM Rule 18
- All notifications the AIM company has made in the past 12 months.
The eligibility requirements for SME Growth Markets require that certain regulatory information remains available for five years once published. In consequence, the above requirements have been amended so that the following must be available on the website for at least five years if published on or after 3 January 2018:
- Any prospectus (by an amendment to the requirement at 2.1 above)
- Annual accounts and half-yearly, quarterly or similar reports (by an amendment to the requirement at 2.2 above)
- Regulatory notifications made public containing inside information for the purposes of the Market Abuse Regulation, (EU) 596/2014 (MAR) (by an amendment to the requirement at 2.3 above).
These requirements took effect from 3 January 2018 and are not retrospective. The latest version of the AIM Rules is available on the LSE's website.
Insider lists exemption
The other significant consequence of AIM being registered as SME Growth Market is that AIM companies no longer need to maintain an insider list in accordance with Article 18, due to an exemption for companies admitted to trading on an SME Growth Market in Article 18(6). The exemption is subject to two conditions. Firstly, that the company takes all reasonable steps to ensure that any person with access to inside information acknowledges the legal and regulatory duties entailed and is aware of the sanctions applicable to insider dealing and unlawful disclosure of inside information; and secondly, that the company is able to provide the FCA, upon request, with an insider list. The exemption is effective from 3 January 2018.
In relation to the second condition, if the FCA requests an AIM company (or any other company the shares of which are traded on an SME Growth Market) to provide it with an insider list, a 'lighter' regime applies both as to the content of the list and the means of transmission. The appropriate template for the list has a reduced content requirement, requiring that personal information (personal address and personal telephone numbers) should only be included in the insider list if this information is available to the Company at the time of the request, which avoids the Company tipping-off the insiders about the FCA's request. The template is set out in Annex II of Commission Implementing Regulation (EU) 2016/347(CIR), which lays down implementing technical standards with regard to the precise format of insider lists.
SME Growth Market Companies are not limited to using the electronic means specified by the FCA, to transmit the insider list to the FCA, there being no prescribed means of transmission, provided that the chosen method ensures that the completeness, integrity and confidentiality of the information are maintained (CIR, Article 3). The electronic means of transmission specified by the FCA would, however, be available.
The AIM Rule changes speak for themselves and are administrative. The insider list exemption involves being able to provide the FCA with an insider list on request, as was the case before this exemption took effect. Given that AIM companies have had to maintain insider lists up until 3 January 2018, it seems likely that many AIM companies will continue to do so (especially where, for example, a major transaction is in contemplation) in order that the company can provide the FCA with an insider list on short notice without it being a significant administrative distraction. Other companies may not want the unnecessary compliance burden and will take advantage of the exemption, the reduced content requirement of the list making the provision of a list to the FCA less burdensome. It will be interesting to see how market practice develops.