• The Exchange will publish a non-exhaustive list of factors that a nominated adviser should consider in its assessment of the appropriateness of a company for admission to AIM (to be included in Schedule Three to the AIM Rules for Nominated Advisers). These factors would include concerns about particular directors, key managers or major shareholders; an unclear rationale for seeking admission; regulators’ formal criticisms of directors or the company; the company’s rejection by other trading platforms; concerns over the company’s structure or business model (including legality concerns, or the absence of key rights or approvals needed to operate the business); or where the group only has a derivative or economic interest in its material assets via potentially risky contracts, rather than outright ownership. The Exchange also plans to clarify that it has discretion to refuse, delay or impose conditions on the admission to AIM of any candidate, even if it technically satisfies the admission criteria (amended Rule 9 of the AIM Rules for Companies).

In relation to both the above changes, the Exchange emphasises that it still remains the obligation of nominated advisers to assess whether or not a candidate is appropriate for admission to AIM.

• The Exchange also plans to require an AIM company to identify on its website the recognised industry corporate governance code (such as the QCA Corporate Governance Code for Small and Mid-Size Quoted Companies) it has adopted and provide an up to date statement of how it complies with the chosen code, together with an explanation of any departures from it (revised AIM Rule 26). To give companies time to prepare, this change will not take effect until 30 June 2018.

Changes that the Exchange will not be taking forward include the following:

• AIM companies will not be required to have a minimum 'free float' (shares not held by directors, major shareholders or other insiders). Instead, as now, the level of free float will be relevant to the assessment of the company's appropriateness for admission to AIM (as discussed in the June 2015 edition of Inside AIM).
   
• AIM candidates (other than investing companies, as required by the current rules) will not have to raise a minimum amount of equity finance at the time of admission. Respondents were concerned that this could lead to unintended consequences, including deterring otherwise suitable companies from joining the market. The Exchange will instead look to provide further guidance to nominated advisers, if required, in the context of their consideration of a company's appropriateness for admission to AIM.
   
• Automatic fines will not be imposed for breaches of the AIM Rules. However, the Exchange will be issuing a consultation in 2018 on proposed changes to its Disciplinary Handbook.

The feedback to the original discussion paper suggests that the more limited changes now proposed are more in line with the expectations of market participants, with the flexibility of the existing regime being maintained and the emphasis remaining on the importance of disclosure rather than prescriptive rules.

To coincide with the coming into force of MiFID II on 3 January 2018, the Exchange has also applied for AIM to be registered as an SME growth market. This will enable AIM companies to benefit from certain (limited) regulatory exemptions in the EU Market Abuse Regulation. As part of these changes, the Exchange will also amend AIM Rule 26 to require that AIM companies make available on their website for at least five years any prospectuses, periodic financial reports and inside information that they publish on or after 3 January 2018.

The Exchange seeks responses to its consultation by 29 January 2018.

Client Alert 2017-309