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AIM Strengthening the ruels |
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One of the world’s most successful stock markets, AIM (the Alternative Investment Market of the London Stock Exchange), has enjoyed great success since it was set up in 1995. David Glass of London based law firm Pritchard Englefield reviews the atest developments.
There are now nearly 1700 companies quoted on AIM of which about 350 are overseas based.
AIM, which is technically the junior Market of the London Stock Exchange (LSE), was specifically set up as the Stock Exchange for smaller higher growth companies as a more appropriate trading platform for such companies than the main board of the LSE. A deliberate decision was taken by the authorities to regulate AIM with a “light touch”, vesting the main responsibility for such regulation not in the Stock Exchange itself but in a new breed of Nominated Advisers (NOMADs) who are mainly private sector investment banks authorised by the LSE to act both as policemen of the AIM rules and as a guide for the individual companies coming onto AIM. The involvement of practitioners in the way in which the London financial markets regulate themselves is perhaps uniquely British and has worked well in the past, as exemplified by such bodies as the Takeover Panel which regulates many public mergers and takeovers within the UK.
There has been some criticism of AIM that its touch is in fact too light for modern world securities trading environments and the LSE, ever watchful to preserve its reputation, has reacted over the years by expanding and adding to its AIM rules book where the LSE has felt it necessary to do so to preserve the integrity of AIM. The latest most significant development has been the issue of a brand new rules book for Nominated Advisers taking effect from the 20th February 2007. This has been matched at the same time by an expanded AIM rules book for companies taking effect on that date containing, for instance, enhanced disclosure requirements for companies through the use of websites and in other ways. The AIM Disciplinary Procedures and Appeals Handbook has also been updated with effect from that date.
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These new or amended rules books are the product of consultation by the LSE with the NOMAD community and others over a considerable period and in particular since October 2006 when draft new rules were published.
The new rules book for AIM NOMADS is particularly significant since it codifies in detail for the first time the requirements that have to be satisfied before an institution will be granted NOMAD status by the LSE and it also stresses the continuing obligations on NOMADs to ensure that the companies they effectively bring to market are suitable and appropriate and will comply with the AIM rules on an ongoing basis.
The updated AIM rules book for companies reflects developments in international accounting standards, new reporting obligations for companies under EU and UK legislation and the importance of electronically available information within the wider information society context.
Notwithstanding the new regulations, the LSE is clearly determined to preserve AIM’s reputation as a user-friendly Market for both domestic and international companies and, given the LSE’s track record for both integrity and pragmatism over the years, there is an excellent chance that the LSE will succeed in its ambition!
© February 2007 David Glass
All Rights Reserved.
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