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Changes to SME growth markets

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Summary: The European Commission has put forward proposals to alleviate some of the regulatory burdens under the Market Abuse Regulation following its consultation last December. The amendments would apply to all issuers with securities admitted to trading on an SME Growth Market i.e. AIM. The proposals would also create a lighter prospectus regime for transfers from AIM to the Main 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.

Background

SME Growth Markets are a new category of multilateral trading venues introduced by MiFID II 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.  The one exception to this is the exemption from the requirement to maintain an insider list albeit that there is still a requirement to (i) ensure that any person with access to inside information acknowledges their legal and regulatory duties and (ii) provide the FCA, upon request, with an insider list. 

Proposals

To alleviate some of the regulatory burdens, the EU Commission (Commission) is proposing to amend the Market Abuse Regulation as follows:

  • 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 address any timing issues, PDMRs are often required, under their share dealing code, to notify the issuer as soon as possible and in any event within one business day after the transaction.  The Commission is proposing to extend the deadline for issuers to publicly disclose PDMR transactions to two days from receipt of notification;
  • Insider lists – issuers on SMEs Growth Markets would only have to produce permanent insider lists i.e. people who have regular access to inside information relating to the issuer.  This derogation would only apply to SME Growth Market issuers and not their advisers; and
  • Delaying disclosure of inside information – currently, an issuer who delays disclosure of inside information must notify the FCA, when announcing the inside information, of the delay and if requested by the FCA, provide an explanation of why it believed the delay was justified.  To lower the administrative burden for issuer’s on SME Growth Markets, the Commission is proposing that issuers would not be required to keep disclosure records but they would still be required to notify the FCA of any delayed disclosure and provide justification, if requested.

In addition, the Commission is proposing to create a new category of prospectus called a ‘transfer prospectus’ that will allow issuers, with at least three years of listing on a SME Growth Market, to produce a lighter prospectus when transferring to a regulated market i.e. the Main Market.

The proposed regulation now passes to the European Parliament and the Council for discussion.

View the proposed regulation.

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