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Companies fined and censured for breach of AIM Rules

Business Meeting 10 Print publication

17/09/2018

Walker Morris Part of the Risk SeriesThe London Stock Exchange has privately censured and fined two AIM companies and publicly censured and fined MBL Group plc for breaches of the AIM Rules in relation to disclosure and compliance.

The London Stock Exchange (LSE) has recently fined and privately censured two AIM companies and publicly censured and fined MBL Group plc £125,000 for breaches of the AIM Rules. The rules that were breached were Rule 10 (Principles of disclosure), Rule 11 (General disclosure of price sensitive information) and Rule 31 (AIM company and directors’ responsibility for compliance).

AIM Rule 10 (Principles of disclosure)

Where a company is required to make an announcement under the AIM Rules, AIM Rule 10 requires the announcement to be made via an RIS no later than it is published elsewhere.

In one of the companies that was privately censured, the company gave an update regarding the progress of its business via social media. Some of the information that was disclosed was information which should have been notified to the market via an RIS before it was disclosed through social media and therefore the company was in breach of AIM Rule 10. In addition, by failing to have sufficient procedures, resources and controls in place to monitor its social media output, the LSE found that the company had also breached AIM Rule 31. This rule provides that an AIM company must have in place sufficient procedures, resources and controls to enable it to comply with the AIM Rules.

AIM Rule 31 (AIM company and directors’ responsibility for compliance)

In addition to providing that an AIM company must have in place sufficient procedures, resources and controls, AIM Rule 31 also requires an AIM company to provide its nominated advisor (Nomad) with any information it reasonably requests or requires in order for that Nomad to carry out its responsibilities under the rules. The purpose of the rule is to ensure that the Nomad is fully aware of developments within the company so that it can fulfil its regulatory role.

In the case of the second privately censured company, the LSE concluded that the company had breached AIM Rule 31 by not keeping its existing Nomad informed as to its progress in appointing a successor Nomad, despite frequent requests to do so within the notice period. The requirement to keep a Nomad fully aware of developments within the company still applies even during the period in which a Nomad is serving notice.

AIM Rule 11 (General disclosure of price sensitive information)

An AIM company must issue notification without delay of any new developments which are not public knowledge which, if made public, would be likely to lead to a significant movement in the price of its securities.

MBL Group plc was found to be in breach of this rule because the company failed to notify, without delay, information of which it became aware in relation to the significant deterioration in the financial performance of the subsidiaries it was preparing to sell. The information was price sensitive and also at odds with information that had previously been disclosed to the market.

WM comment

These cases highlight how important it is to ensure that the continuing obligations under the AIM Rules are complied with. AIM companies must ensure that they consider properly the disclosure implications of relevant financial information available to them. In addition, when notifying information, they must take care to ensure that the information does not, by omission, create an incomplete understanding. AIM companies must also ensure that they have sufficient procedures, resources and controls in place to meet their obligations under the rules at all times. It is clear that where there is actionable evidence, the LSE will bring to account companies that fail to meet the required standards of disclosure.

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