The Market Abuse Regulation

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Key changes and action points for AIM companies

Introduction
The Market Abuse Regulation (“MAR”) comes into effect on 3 July 2016. MAR will have direct effect in all EU member states. Unlike its predecessor, the Market Abuse Directive, MAR will apply to companies with securities traded on multilateral trading facilities (including AIM) as well as companies with securities traded on a regulated market (such as the Main Market).

The Financial Conduct Authority (“FCA”) will be primarily responsible for policing compliance with MAR in the UK. Accordingly, from 3 July 2016, AIM companies will become subject to a two-tier regime under the remit of both AIM and the FCA.

AIM companies are advised to familiarise themselves with the proposed changes to the AIM Rules and their obligations under MAR. This note provides a summary of the key changes such companies face and some practical steps they should consider taking now, ahead of 3 July 2016, in order to ensure they are prepared for such changes.

Summary of changes and suggested action points

1. Inside Information
Under MAR, an AIM company will be required to disclose inside information (currently known as unpublished price-sensitive information) as soon as possible, unless delay is permitted due to one or more limited circumstances. Whilst AIM Rule 11 provides a similar disclosure requirement, it is important to note that:

• MAR includes some significant additional requirements where a decision has been made to delay the disclosure of inside information, including:

1. a requirement to keep detailed records of such decision (including the time and date when the decision was made and the persons responsible for making the decision and for ongoing monitoring of the delay); and
2. a requirement to notify the FCA, at the time the relevant information is disclosed to the market, that the disclosure was delayed together with, if requested by the FCA, an explanation of why the company believed a delay was justified 

• the circumstances which justify delaying disclosure of inside information under AIM Rule 11 are narrower than those set out under MAR; and
• MAR sets out format and content requirements for the notification of information to the market and requires that all information which has been publicly disclosed is posted to the company’s website and kept there for a period of at least five years.

Accordingly, when deciding to delay the disclosure of any inside information, compliance with MAR will not necessarily satisfy the requirements of AIM Rule 11 and vice versa. Whilst AIM has decided to retain AIM Rule 11, it is proposed that the guidance notes be amended to make it clear that AIM companies are subject to a dual-compliance obligation.

Action points:

Review the company’s procedures for identifying and disclosing inside information and amend to be consistent with MAR and AIM Rule 11 with MAR. Establish formalised and documented processes if not already in place.

Consider appointing a disclosure committee. If no committee is to be appointed, the directors should ensure there is clarity on who is responsible for taking decisions regarding disclosing/delaying disclosure of inside information.

Ensure proper records are kept in relation to inside information (in particular any decision to delay disclosure). Consider adopting templates for recording such decision.

Take steps to enable all information disclosed to the market can be made available on the company’s website.

Nominate an appropriate person to take responsibility for liaising with the FCA and consider how this fits with communication with the company’s Nomad and AIM. Implement a process to ensure the company’s Nomad is kept informed of all interactions with the FCA.

2. Insider Lists
MAR requires AIM companies to maintain lists of persons working for them who have access to inside information (“insider lists”). Previously this requirement only applied to companies listed on the London Stock Exchange’s Main Market.

The insider lists will need to follow the format prescribed by MAR and will need to contain a range of details including (amongst other items):

• birth surname (if different from current surname(s));
• date of birth;
• national identification number (if applicable);
• personal address; 
• professional and personal telephone and mobile numbers; and
• the time and date at which such person obtained access to inside information.

Companies may, if they wish, keep their insider lists in two sections, one detailing deal or event-specific items giving rise to inside information and another which sets out the company’s regular, permanent insiders (i.e. those persons who, if inside information exists at any given time, would have access to it).

Companies will be required to submit their insider lists to the FCA upon request.

Action points:

Ensure a MAR-compliance policy on maintaining insider lists is in place together with a MAR-compliant template (consider using MAR’s template).

Consider whether to maintain a permanent insiders list as well as lists for deal/specific information.

Review any existing insider lists and, if they will still be in place on 3 July 2016, update where necessary to ensure they are MAR-compliant.

3. New responsibilities for “persons discharging managerial responsibilities” (PDMRs)

MAR sets out new rules on dealings by PDMRs and “persons closely associated” with them. In light of these restrictions and notification obligations, AIM is intending to delete the notification requirements of AIM Rule 17 in respect to directors dealings and replace it with a signpost to the relevant MAR provision. AIM Rule 21 (restrictions on dealings) will also be deleted and replaced with a new rule requiring the AIM company to have a dealing policy and setting out the minimum provisions which it should include (see paragraph 4 below).

The key MAR provisions in respect to dealings by PDMRs and persons closely associated with them (such as includes certain family members and connected legal entities) are:

• Close periods: 30 calendar days before the announcement of the company’s interim or year-end financial report (previously 60 days).
• Timing of notifications: PDMRs must promptly notify the company and, in any event, within three business days of dealing. The company must in turn make that information public within the same period (i.e. within three business days of the transaction).
• Permitted dealings: the list of circumstances in which dealing is permitted during a closed period has been narrowed to:

1. exceptional circumstances, e.g. severe financial difficulty; 
2. transactions under an employee share scheme; and
3. transactions resulting in no change to beneficial interest.

• Content requirements: MAR provides a specific template for the notification of the transaction.
• Threshold for notifications: dealings only need to be reported once a threshold of €5,000 has been reached within the calendar year by that PDMR.

Action points:
Identify all PDMRs in the company (i.e. whether there are any non-directors who should be treated as PDMRs) and identify their “closely associated persons”.

Ensure all PDMRs are briefed on the key changes and are familiar with the company’s new share dealing policy (see paragraph 4 below).

Consider whether or not to adopt the MAR-approved threshold exemption for notifications (and include relevant provisions in the company’s share dealing policy – see paragraph 4 below). It is expected that most companies will not include this provision in their share dealing policies due to the difficulties of policing such carve-out.

4. Share Dealing Policy

AIM Rule 21, which is to be deleted (see paragraph 3 above) will be replaced with a new rule requiring AIM companies to adopt a dealing policy. While the new rule will not prescribe the detailed content of the policy, it will set out the minimum provisions that AIM would expect to be included in the policy.

Existing AIM companies will be expected to update their policies to ensure compliance with the proposed new rule by 3 July 2016 and will need to ensure such policy reflects the new provisions under MAR.

It is important to note that MAR will lead to the deletion of the Model Code from the Listing Rules (which apply to Main Market companies). Whilst AIM companies are not bound by the Model Code, it has historically been used by many AIM companies as the base for their share dealing codes. It is expected that industry-led share dealing codes and best practice will emerge and this concept is supported by the FCA.

Action points:

Review your existing share dealing code and consider impact of MAR and new AIM Rule 21. Ensure such amendments as are necessary to comply with MAR and AIM Rule 21 are implemented on or before 3 July 2016.

This note is intended to provide a high level guide to the key changes facing AIM companies in July 2016 as a result of MAR coming into effect and is not intended to be comprehensive. Please contact us if you would like to discuss any of the issues raised.