LSE to unveil review of Aim regulations

LSE to unveil review of Aim regulations

By David Blackwell

Financial Times

1st October 2006

The London Stock Exchange is to unveil a far-reaching review of the regulatory framework for Aim, the junior stock market that has grown from a few dozen companies to 1,600 since it was launched 11 years ago.

Two main proposals have been made. For the first time, the nominated advisers - nomads - will get their own rule book.

In addition, all Aim companies will be required to display core management and financial information on their websites.

Consultation on the proposed changes will start immediately and last two months.

If market participants agree, the new rules will take effect from the beginning of next year.

Aim has grown rapidly after successfully spreading its appeal beyond the original idea of a market for small, fast-growing UK companies.

It now embraces about 300 companies from overseas, including the US, Israel and China, as well as countries with strong links to the UK such as Canada and Australia.

The LSE and its Aim advisory group have spent several months formulating the plans. Their publication comes as fundmanagers have started to express concern about the quality of the companies arriving on the market.

The concern was reflected in a report last week by Richmond Energy Partners into the oil and gas sector, one of the biggest represented on Aim.

It pointed out that oil companies listed between 2002 and 2004 had delivered average growth of 342 per cent.

But those listed in the past two years had delivered an average loss of 5 per cent, despite higher average oil prices. The report said: "The performance of recent initial public offerings shows that the quality has become much more variable and investors need to be more selective about the companies they invest in."

The key to the lighter regulatory touch at Aim is the reliance of the LSE on its 80 or so nomads, who bear responsibility for the quality of the companies coming to market. Until now, the nomads' responsibilities have been reflected only in the rule book for Aim companies.

Now the LSE is proposing to combine existing criteria for acceptance as a nomad with elements of the Aim company rule book, which codifies best practice.

At the same time it will require all Aim companies to publish on their websites up-to-date financial information as well as allowing investors easy access to historical information, such as the admission document. More than 10 per cent of Aim companies, many of them cash shells, do not yet have a website.