AIM's regulatory model

Alternative Investment Market

Is an IPO right for this company?

The Alternative Investment Market (AIM) is a sub-market of the London Stock Exchange, allowing smaller companies to float shares with a more flexible regulatory system than is applicable to the Main Market. AIM was launched in 1995 and has raised almost £24 billion for more than 2,200 companies. Flexibility is provided by less regulation and no requirements for capitalization or number of shares issued. Some companies have since moved on to join the Main Market, although in the last few years, significantly more companies transferred from the Main Market to AIM (AIM has 6) significant tax advantages for investors, as well as less regulatory burden for the companies themselves). In 2005, 40 companies moved directly from the Main MArket to the AIM,while only rwo companies moved from AIM to the Main Market.

Aim has also started to become an international exchange, often due to ita low-regulatory burden, especially in relation to the Sarbanes-Oxley Act (though only a quarter of AIM-listed companies would quality to list on a VS stock exchange even prior to passage of the Sarbanes-Oxley Act)¹. As of December 2005 over 270 foreing companies had been admitted to the Alternative Investment Market.

The independent FTSE² Group maintains three indices for measuring AIM, which are the FTSE AIM UK 50 Index, FTSE AIM 100 Index, and FTSE AIM All-share Index.

Alternative Investment Market (AIM)

AIM is an exchange regulated venue featuring an array of principles-based rules for publicity held companies. AIM's regulatory model is based on a comply-or-explain option that lets companies that are floated on AIM either comply with AIM's relatively few rules, or explain why it has decided not to comply with them.

Nominated Advisers (Nomads)

Aside from granting leeway in regards to regulatory compliance, the Exchange also mandates continuous oversight and advice by the issuer;s underwritter, referred to as a Nominated Adviser (Nomad). The role of Nomads is central to AIM's regulatory model, as these entities play the role of gatekeepers, advisers and regulators of AIM companies. In advising exch firm as to which rules should be complied with and the manner in which existing requirements should be met, Nomads provide the essential service of allowing firms to abide by tailor-made regulation reducing regulatory costs in the process. Theoretically, Nomads are liable for damages from tolerating misdemeanors on behalf of their supervised companies, including the loss of reputational capital. However, this heavy reliance on Nomads receive fees from the companies they purportedly supervise while, in practice, managing to avoid liability for market misdiscount.

In 2006, the London Stock Exchange launched a review of Nomad activities, resulting in a regulatory «handbook' for Nomads published by the Financial Services Authority in 2007.

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