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Over 150 companies forced off AIM after loss of Nomad in the last decade

Publications that covered this story include Accountancy Daily on 25 June 2018.
  • 14 in the last year – lead to huge loss of shareholder value
  • Mifid II regulations have also begun to increase regulatory burden on Nomads

151 companies have been forced off the AIM market after losing their Nominated Adviser (Nomad) over the past decade including 14 in the last year*, our research shows.

The large number of companies being forced off the market in this way is partly due to the number of firms acting as Nomads falling over the years as regulations have been tightened.

The Nominated Adviser (Nomad) is responsible for making sure that the company it advises is fully compliant with the rules of AIM. If a company loses its Nomad, it has 30 days to find another Nomad or be delisted from AIM.

If a company is delisted from AIM then there is typically a huge loss in value for shareholders and a serious lack of liquidity in the market for the shares – only a fraction of those that delist will manage to get back on the market.

There are three main reasons why Nomads resign from their position:

  • Profit margins for Nomads have shrunk as the number of AIM IPOs have remained low. The tighter regulatory framework put in place by the London Stock Exchange has also added to the costs of Nomads. This has been intensified by Mifid II regulations, which have added extra complications and costs for Nomads that are part of broader stockbroking groups.
  • The client is unwilling to accept guidance from the Nomad on the company’s responsibilities to AIM or breaches the AIM Rules for Companies.
  • The reputational risk for the Nomad of continuing to act for that business is too great e.g. if the AIM listed company has poor corporate governance.

Whilst investors have benefited enormously from the tighter standards on AIM a balance needs to be struck to ensure that businesses wanting to list on AIM have a large group of active Nomads to choose from.

Laurence Sacker, managing partner in our London office, says: “Nomads fulfil a vital role in the AIM market and without a healthy roster of Nomads the job of raising funds for small growth companies on the stock market would be much harder.”

“The London Stock Exchange is right to hold market participants to the highest of standards. However, perhaps, it needs to look again at its requirements and regulatory processes for Nomads to see if more advisory firms can be attracted to the market.”

*Year end March 31