The London Stock Exchange (LSE) is to publish guidelines that will strip some corporate advisers of the right to float companies on the Alternative Investment Market (Aim).
The rules, which could come as early as this week, result from a six-month review the LSE launched amid growing concerns over the quality of some businesses listed on the Aim, which is targeted at smaller companies.
The consultation paper will lay out proposed rules governing the role and the minimum requirements for nominated advisers, known as nomads, which are the LSE-approved corporate advisers that vouch for the companies they help float.
"There are some that just won't make the [new] thresholds," said Tim Stocks of City law firm Taylor Wessing. Sources say the queue of brokers applying to the LSE to become nomads is now near 30, and that the application process had "ground to a halt" while the new rules are hammered out.
In terms of floats, Aim is now the busiest market in the world. It has more than 1,500 companies with a combined market capitalisation of £73bn. More international companies are listing on the exchange, and applications for nomad status from foreign corporate advisers have also increased.
Aim's light regulatory regime, which relies on nomads to monitor the companies they take to the market, is key to its success.
Of the 86 nomads approved by the LSE, however, some are inactive or have had several poorly performing floats. These are expected to be the most vulnerable. "This will be a tightening of the screw," said one nomad chief executive. "It will probably be more prescriptive. It's already harder to get nomad status than it was a year ago."
An LSE spokesman denied that the review was intended to weed out the current roster. "Aim is a much larger market than it was five years ago: it's much more international. We are looking to see whether the way we regulate Aim is still valid."
Once the consultation paper is published, interested parties will have two months to respond. The new rules are then expected to be enforced by year-end.Reuse content