Helping you prosper
Press release featured in City AM.
222 companies have had to delist from AIM in the last 20 years as they have lost their Nominated Adviser (Nomad), shows research.
The number of these delistings should be seen as support for the London Stock Exchange’s proposals to reduce some of the compliance burdens on Nomads announced on 4 June.
The Nomad is responsible for making sure that the company it advises is fully compliant with the rules of AIM as well as acting as the AIM listed company’s corporate finance adviser.
If a company loses its Nomad, it has 30 days to find another Nomad or be delisted from AIM – an event that normally leads to a sharp fall in the value of the company’s shares.
A perceived increase in the compliance burdens on Nomads has led Nomads to drop some of their “riskier” clients or even withdraw from being a Nomad altogether.
There are now just 23 Nomads firms, versus 30 Nomads in 2020 and 68 in 2009.
The London Stock Exchange’s AIM reforms on 4 June are intended to reduce the compliance obligations of Nomads as the “increase in the perceived risk associated” with the role has discouraged corporate finance firms and larger banks from being a Nomad.
Nomads can be fined significant amounts for inadequate due diligence of companies planning to list on AIM, poor advice to AIM companies, poor record keeping etc.
The 4 June note from the London Stock Exchange for Nomads clarifies that:
- Nomads do not need to hire their own lawyers to verify the work of a company’s lawyers relating to an AIM admission
- where a company is joining AIM from the Main Market, the Nomad does not need to undertake IPO style due diligence
- the Nomad does not have responsibility for ensuring that an AIM company’s website has the correct information on it to comply with disclosure rules
- a Nomad is not obliged to monitor online commentary about an AIM company taking place in chatrooms, blogs, etc
- where a Nomad takes on an existing AIM listed company, they can assume that the directors of this company understand the AIM rules
- the Nomad is not required to provide an annual update of education to its AIM companies of AIM rules
- Nomads do not need to make unnecessary site visits to AIM listed companies.
Colin Wright, UHY Hacker Young Group Chairmain, says: “We are really welcoming of the London Stock Exchange’s initiative to reduce some of the actual and perceived burdens on being a Nomad and listing on the AIM market.”
“We’re not a Nomad firm ourselves but we feel that a healthy community of Nomads means a healthy AIM market.”
“A lot of market participants have been concerned by the reduction in numbers of Nomads over the years. Unfortunately, some Nomad firms made the decision that the regulatory risks outweighed the rewards of AIM work.”
“The pendulum had swung too far in the direction of overregulation of AIM and the London Stock Exchange has started to fix that problem.”
Nomads play a really important role in marketing the concept of AIM to businesses so a bigger community of Nomad firms should lead to more IPOs on AIM.”
The London Stock Exchange in its November discussion document said that the AIM community felt that, over the years, “the growth, scale and maturity of the market has inevitably been accompanied by a lower tolerance for risk, leading to the development of market practice and regulation that respondents consider does not reflect the true or founding purpose of AIM.”
