More Stringent Reporting Requirements for AIM and Plus Companies

25 October, 2010

From 1 October 2010 AIM and Plus quoted companies are now subject to certain requirements regarding their results and other announcements that previously only applied to companies that are fully listed.  The relevant legal provisions can be found in Section 90A and Schedule 10A of the FSMA (The Financial Services and Markets Act 2000.)

 

Main changes

1 The main change is that AIM and Plus (and companies quoted on other UK markets) as well as fully listed companies, can now be liable for fraudulent misstatements contained within regulatory announcements that they make.

2 The new rules also introduce a new offence of delaying the publication of information dishonestly. 

3 The new rules will also allow claims by investors who sell or continue to hold securities in reliance on a disclosure by a company.

 

What disclosures does the new requirement apply to?

The answer is all information that a company announces via a RIS (Regulatory Information Service).

 

Who can claim for a breach of the Rules

The pre 1 October regime meant that only investors who acquired securities relying on a disclosure could potentially rely on the protection available. Post 1 October, the ability to claim will be extended to investors who:-

• have disposed of securities in reliance on a disclosure; or
• have continued to hold securities in reliance on a disclosure.

 

However, an investor can only claim if he/she can show that he/she relied on the statement when making their investment decision.

 

Who can be liable?

A listed company can potentially be liable to investors under the regime.  For liability to be established against the company, its directors must be shown:-

• to have known that the relevant announcement was untrue or misleading; or
• have known that the omission was the dishonest concealment of material facts.

 

Conclusion

Most listed companies are very careful to ensure that the information that they release to the market is accurate.  The new rules make it likely that there will be more careful documentation of the process by which market announcements are compiled and approved.  There is likely to be greater focus on the verification process related to announcements and of the decision making process regarding the timing of issuing announcements, especially if there could be a debate around whether or not an announcement might need to be delayed.

 

Reviewed in 2015