On 11 December 2019, a Regulation amending the Market Abuse Regulation and the Prospectus Regulation was published. The aim of these amendments is to increase the attractiveness of SME Growth Markets by reducing some of the administrative burdens and compliance costs faced by issuers on an SME Growth Market.

These proposals will be welcomed by the market as many AIM companies often need assistance and guidance on dealing with inside information and insider lists and find these aspects take significant time to administer.

Key changes

SME growth markets were a new category of multilateral trading venues introduced to facilitate access to capital for smaller and medium-sized companies.  Since 3 January 2018,  AIM has been registered as an SME Growth Market but currently there are limited benefits of being listed on AIM as an SME Growth Market.  It is hoped that this Regulation, which amends the Market Abuse Regulation (MAR) and the Prospectus Regulation (PR), will change this perception.

Key changes to MAR for SME Growth Markets:

• Delaying disclosure of inside information – currently, an issuer must notify the FCA after delaying disclosure of inside information and must keep appropriate records in case the FCA request a written explanation of the reasons for the delay.  Going forward, issuers on AIM will not be required to keep a record of explanation provided they are able to justify the decision to delay.
• Insider lists – currently issuers on AIM only have to produce an insider list upon request from the FCA but in practice AIM companies maintain insider lists to ensure ongoing disclosure requirements can be met.  Under the new rules, companies on an SME Growth Market only have to include on their insider lists those persons who, due to the nature of their function or position within the issuer, have regular access to inside information.  However, member states may, by way of derogation and where justified by specific national market integrity concerns, require issuers to include in their insider lists all persons who have access to inside information.  We do not know yet what the approach of the FCA will be.
• PDMR transactions – currently PDMRs must notify the issuer within three business days after the date of the transaction and the issuer must also make this information public within the same timescales.  To help companies comply with these tight deadlines, issuers will have two days from receipt of notification to publicly disclose PDMR transactions.  Companies may want to amend their share dealing codes to reflect the new timing.

Key changes to PR for SME Growth Markets:

• An unlisted company which is seeking an admission to trading on a regulated market (such as the London Stock Exchange’s Main Market) following an exchange offer, merger or division, will be required to produce a prospectus.  This resolves an unintended consequence of the current exemption (i.e. from the obligation to produce a prospectus in connection with a takeover, merger or division) which meant that unlisted companies, in some circumstances,  were able to carry out an initial admission of shares to trading on a regulated market without producing a prospectus.
• To help growing companies move from AIM to a regulated market ie. the Main Market, issuers with at least two years of trading on a SME Growth Market and who have fully complied with reporting and disclosure obligations will be able to use the simplified disclosure regime in the PR when moving those shares to a regulated market.

These measures above will apply to companies listed on SME growth markets, irrespective of the fact that not all companies listed on SME Growth Markets are SMEs.

The regulation will apply from 31 December 2019 but the amendments to MAR will not take effect until 1 January 2021.

Regulation 2019/2115

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