COVID-19: Implications for MAR and AIM Rules obligations

COVID-19 presents new challenges for AIM companies in meeting their obligations under the AIM Rules and MAR, particularly regarding price sensitive information

31 March 2020

While AIM companies continue to prepare for and respond to the impact of COVID-19, they need to remain mindful of how their regulatory obligations under the Market Abuse Regulation ('MAR') and the AIM Rules for Companies ('AIM Rules') might apply to the impact of the virus on their businesses. These include the disclosure obligations under these regimes and the need to manage and control price sensitive information, to which COVID-19 will be relevant.

In this article, we introduce some considerations for AIM companies when managing these obligations in these unprecedented circumstances. 

Disclosure and information control requirements under MAR and the AIM Rules

This is a complex area that requires detailed examination on a case-by-case basis. However, by way of a broad summary, under the Market Abuse Regulation and AIM Rules, AIM companies must disclose any specific information that directly affects them which, if made public, would be likely to have a significant effect on the price of their listed securities, including their shares. That disclosure ordinarily takes the form of an announcement released via the London Stock Exchange’s Regulatory News Service (‘RNS’). Relevant information is likely to include any that a reasonable investor might consider when deciding whether to buy or sell shares in the relevant AIM company. The information might not only relate to circumstances that already exist, but also to those which have a realistic prospect of occurring.

There are limited situations in which AIM companies are permitted to delay disclosure of such information. However, an AIM company should take advice before judging whether it can do so as the consequences of failing to disclose the information at the necessary time can be significant. Meanwhile, MAR and the AIM Rules also require AIM companies to maintain systems and controls to manage any information which meets these criteria.

There has been no indication by the Financial Conduct Authority (the 'FCA') or the London Stock Exchange, who are responsible for enforcing MAR and the AIM Rules, respectively, that they intend to relax their approach to these requirements in light of the disruption caused by the outbreak. In fact, in its recent coronavirus update the FCA underlined that AIM companies should continue to comply with their obligations under MAR and that the FCA continues to expect them to make every effort to do so in a timely fashion.

Why COVID-19 is relevant to your disclosure obligations?

Clearly, COVID-19 continues to have a significant impact on the businesses and share prices of publicly traded companies across the globe for reasons that are well known, even if our understanding of the virus is evolving. However, AIM companies cannot rely upon these broad circumstances alone to account for any fall in their share price or to eclipse any other impacts of the virus on their own business. Each AIM company’s individual situation and the particular effects of the virus on its business (whether actual or potential) will determine whether an announcement is necessary.

Therefore, you should assess on an ongoing basis whether, beyond the macroeconomic impact of the virus, there are effects of COVID-19 on your business that differ from others in your sector, market, area of operations, or any other relevant category. Aspects of your business which you might consider include the specific (but not necessarily unique) implications of the virus for your employees, customers, suppliers, revenue and geographical area. Whether, were they public knowledge, these specific effects might depress or boost your share price, they might represent information which you need to disclose.

Do note that your contingency planning or operational response to COVID-19 might themselves constitute information which needs to be disclosed, particularly if these diverge from those of comparable companies. In addition, if you have made any specific projections in your half-year results or annual report and accounts (whichever is the more recent) around your revenue or growth, you should analyse whether these need to be updated.

For AIM companies who are due to release their preliminary financial statements shortly, please also note that the FCA has asked all listed companies to delay publication of these for 'at least two weeks', in order to reduce pressure on these companies and ensure that any results take account of the impact of COVID-19.

Meanwhile, please also note that AIM has issued a statement permitting AIM companies whose financial years end between 30 September 2019 and 30 June 2020 to apply, via their nominated adviser, for a three-month extension to the reporting deadline for their annual accounts, which would otherwise ordinarily fall 6 months after financial year end. In addition, the Financial Reporting Council has issued new guidance on preparing financial statements in the uncertain environment created by COVID-19.

Why COVID-19 is relevant to your information control obligations?

Meanwhile, as a result of the UK Government’s and AIM companies’ own measures to contain the spread of COVID-19, the ways in which you and your employees work and communicate might be changing (for example, to accommodate working from home on a significant scale). In order to remain compliant with your regulatory obligations, there may need to be a corresponding update to your systems and controls for managing price sensitive information of the kind described above.

Steps which you might need to take in order to reflect new working patterns might include the following:

  • If new conferencing software or computer hardware is being introduced to facilitate working from home, you will need to establish the level of security of these systems and any confidential and/or price sensitive information that they might store;
  • If any documents containing confidential and/or price sensitive information are going to be drafted or reviewed outside your offices, you should ensure that they can stored securely offsite; and
  • If, as is widely being advised, you or any of your employees establish WhatsApp groups to maintain morale during periods of self-isolation, you will need to ensure that confidential and/or price sensitive information is not shared in this forum, where it will be difficult to monitor and/or where it may then be stored on personal devices.

We note that these considerations will also be relevant to your obligations under the General Date Protection Regulation (or ‘GDPR’).

Conclusion

You should assume that your disclosure obligations under MAR and the AIM Rules will continue to apply throughout the disruption caused by COVID-19 and you will need to review these on a regular basis. In order to remain compliant with them, you may need to make multiple announcements concerning the specific impact of COVID-19 on your particular business. In addition, you should review how you manage and control price sensitive information as your business adapts its way of working around measures being introduced by the UK government and your own response plan.

Next steps

This article is only a brief introduction to a highly technical area of the law and its application to a rapidly changing set of circumstances. It is not legal advice, nor does it deal with every aspect of this complex topic in this unprecedented situation. If you would like advice in relation to your disclosure obligations or any other element of your preparation for and response to COVID-19, please speak to your normal contact at Burges Salmon or contact Nick Graves or Rupert Weston.

Key contact

Nick Graves

Nick Graves Partner

  • Corporate Advice
  • Mergers and Acquisitions
  • Reorganisations and Demergers

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