Alternative Investment Market

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. The 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 capitalisation 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 the AIM (The AIM has 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 two companies moved from the AIM to the Main Market.

The AIM has also started to become an international exchange, often due to its low-regulatory burden, especially in relation to the Sarbanes-Oxley Act (though only a quarter of AIM-listed companies would qualify to list on a U.S. stock exchange even prior to passage of the Sarbanes-Oxley Act [ [ Doidge, Karolyi and Stulz "Has New York Become Less Competitive in Global Markets? Evaluating Foreign Listing Choices over Time"] ] ). As of December 2005 over 270 foreign companies had been admitted to the Alternative Investment Market.

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

Aim's regulatory model

The Alternative Investment Market is an exchange regulated venue featuring an array of principles-based rules for publicly held companies. AIM’s regulatory model is based on a comply-or-explain option that lets each company listed on AIM either comply with AIMs relatively few rules, or explain why it has decided not to comply with them. Aside from granting companies some leeway in regards to regulatory compliance, the exchange also mandates continuous oversight and advice by the issuer's underwriter, referred to as a Nominated Adviser (Nomad). Nomads’ role is central to AIM’s regulatory model, as these entities play the role of gatekeepers, advisers and regulators of AIM companies. In advising each 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 has been criticized as creating a conflict of interest, since Nomads receive fees from the companies they purportedly supervise while, in practice, managing to avoid liability for market misconduct. 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. cite journal
last = Mendoza
first = Jose Miguel
title = Securities regulation in low-tier listing venues: The rise of the Alternative Investment Market
journal = Fordham Journal of Corporate & Financial Law
volume = XIII
issue = 1
pages =
publisher =
location = New York
month = October | year = 2007
url =
format = abstract

Because AIM is an exchange regulated market segment, it escapes most of the mandatory provisions contained in European Union directives -as implemented in the UK- and other rules applicable to companies listed in the LSE. AIM believes self-regulation is pivotal to AIM’s low regulatory burden: companies seeking an AIM listing are not subject to significant admission requirements; after admission is granted, firms must comply with ongoing obligations which are comparatively lower to the ones that govern the operation of larger exchanges; and certain corporate governance provisions are not mandatory for AIM companies. AIM-listed companies usually are only required to adhere to the corporate governance requirements of their home jurisdiction, which, as a practical matter, vary widely.

Another important element of AIM’s model is the composition of its investor base. Although AIM-listed companies are not start-ups, most are small and highly risky. This may prove to be hazardous for unsophisticated investors which lack both the knowledge and resources to conduct proper inquiries into a firm’s prospects and activities, or even larger investors which lack strong internal control and risk management requirements. As a consequence, AIM’s investor base is largely composed of institutional investors and wealthy individuals.

Market capitalisation

The following table lists the 15 AIM companies which had a market capitalisation of £375 million or more on 29 July 2008.

Source: File linked from [ this page] .


In March 2007, U.S. securities regulator Roel Campos suggested that AIM's rules for share trading have created a market like a "casino". Campos reportedly said: "I'm concerned that 30% of issuers that list on Aim are gone in a year. That feels like a casino to me and I believe that investors will treat it as such.". [ [,,2030750,00.html?gusrc=rss&feed=24 Treanor, Jill "City hits out over US 'casino' jibe at Aim" The Guardian 10 March 2007] ] The comment resulted in several angry retorts, including one from the LSE, which controls AIM, pointing out that the number of companies that go into liquidation or administration in a year is actually fewer than 2%.

AIM has since issued new rules requiring that listed companies maintain a website [] .

Langbar International Limited Fraud

The AIM has come under additional criticism for allowing Langbar International to be listed. [ [ "Has the Langbar scandal damaged AIM's healthy reputation?" The Lawyer 24 September 2007] ] At £375 million ($750m) Langbar is the biggest share fraud on the Exchange to date. It is presently being investigated by the Serious Fraud Office [ [ Serious Fraud Office Press Releases 29 November 2005] ] [ [ "Fraud inquiry starts into shell firm's missing millions" The Guardian 26 November 2005] ] [ [ "Langbar: The SFO are called in" Yorkshire Post 29 November 2005] ] and the City of London Police. It was discovered in November 2005, that Langbar had none of the assets it declared at listing and this was due in part to the failure of the Nomad (Nominated Adviser) to carry out Due Diligence and the Exchange failing to ensure that the AIM rules had been complied with. After the fraud was uncovered, the AIM changed the rules for Nomads in 2006 [ [ "Sharewatch: LSE takes AIM" The Sunday Times 2 July 2006] ] [ [ "Inside the City: Rogue nomads in the firing line" The Sunday Times 2 July 2006] ] [ [ "LSE takes aim at nomads to quell concerns" Daily Telegraph 3 October 2006] ] and on 19 October 2007 they fined Nabarro Wells £250,000 ($500,000), and publicly censured them for breaches of the AIM rules. [ [ "Nomad strayed from market rules" Financial Times 19 October 2007] ] [ [ "Nabarro Wells censured by LSE over listing" Evening Standard 19 October 2007] ] [ [ LSE hits Nabarro Wells with £250,000 fine over AIM checks" The Times 20 October 2007] ]


In March 2007 the "Daily Telegraph" noticed a tendency to use listing vehicles incorporated in Offshore Financial Centres prior to floating on AIM. Some 35% of the companies floated on AIM during 2006 were from OFCs, of which the majority came from the Channel Islands or the British Virgin Islands. [ [ Essen, Yvette "Aim market: Offshore attractions for the 'sophisticated' investor" 12/03/2007] ]


ee also

*List of AIM companies
*Nominated Adviser (NOMAD)
*Growth Enterprise Market of Hong Kong

External links

* [ AIM homesite (English)]
* [ FTSE Group website]
* [ AIM Listing News]
* [ MoneyWeek Magazine Alternative Investments]
*cite news
title = Aim for the ambitious
publisher = The Daily Telegraph
date = 2005-05-25
url =

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