USM replacement is revealed: Companies with six-month track record will be eligible to join new exchange

THE STOCK Exchange is launching a replacement for the Unlisted Securities Market that will help in directing capital to smaller and unquoted companies.

The new market, provisionally named the Traded Equity Alternative Market (Team), will accept companies with unqualified accounts, a six- month track record and a board of directors acceptable to the exchange. Shell companies and those with no tangible business will not be eligible.

The exchange's seven-point plan is based on a revamp of an existing occasional dealing mechanism for unquoted shares, section 535.2, as a distinct market with a lighter level of regulation than the main stock market and with easier entry qualifications.

The USM has nurtured almost 900 companies and raised nearly pounds 6bn since its launch in 1980. But EU directives that lowered the track record for a full listing from five years to three, the same as the USM requirement, eroded its position.

The recession also damaged investor interest in smaller companies and the USM will wind down at the end of next year.

Yesterday's proposals by the exchange include a smaller companies group that will champion smaller company issues, a dedicated marketing team to educate companies about the benefits of the exchange's markets and a new stock market index.

The exchange says the new index will encourage more market focus on smaller companies by covering all the 800 companies that trade but are not included in any of the other market indices.

Companies that are venture capital investments will in future be listed as a separate asset class in the market indices to enable easier investment selection by fund managers.