What it means
AIM is a market operated by the London Stock Exchange for smaller and growing companies, with lighter rules than the main market. Instead of a large rulebook enforced by the exchange, AIM relies heavily on advisors to make sure companies behave properly.
The nominated advisor is the central figure in that system. Before a company joins AIM, its nominated advisor must decide whether it is suitable for the market.
This involves checking the business, its directors and its disclosures. The advisor then confirms to the exchange that the company meets the admission requirements.
After listing, the advisor remains involved. It advises the directors on how to comply with the AIM rules, such as announcing price-sensitive news promptly, and it must be consulted on certain significant transactions.
If a company loses its nominated advisor and cannot find a new one, trading in its shares can be suspended. The exchange approves these firms and can remove them if they fail to meet standards.
Many are corporate finance houses, brokers or accountancy practices with a specialist team. A company selects its advisor carefully, because a good one helps with fundraising and investor relations as well as compliance.
For a manager at a small listed company, the practical points are cost and reliance. Advisory fees are an ongoing expense, and the directors remain responsible for compliance, so they cannot hand that duty over completely.
Regular contact with the advisor about forecasts, announcements and changes in the business is good practice. The role is specific to AIM, but other markets have similar gatekeepers under different names.
Anyone working with a company listing on a smaller exchange should ask who plays this part. The answer shows who is accountable for checking the company is ready.
In practice
Real-world examples.
Example
A software company with $12,000,000 in revenue decides to list on AIM to raise growth funds. It appoints a nominated advisor, which spends several months reviewing the business and its directors. The advisor confirms to the exchange that the company is suitable, and the shares begin trading. The directors note that the process took longer than expected but gave investors more confidence in the company.
Example
A listed mining company wants to announce a major acquisition. Its directors consult the nominated advisor first, as the rules require for significant transactions. The advisor helps them prepare the disclosure and confirms that it meets the rules. The announcement is released on time and the share price moves very little, which the directors take as a sign that the market was not surprised.
Example
A small drinks company's nominated advisor resigns. The company has a limited time to appoint a replacement or face a suspension of trading. The chairman signs an agreement with a new advisor within the deadline. The episode reminds the board that the advisor relationship needs regular review, and the chairman sets a yearly meeting to assess the service.
Case study
Seen in the real world.
Kestrel Biosciences is a fictional research company that planned to list on AIM to raise $15,000,000. In this illustrative story, it chose a nominated advisor with experience in healthcare companies and paid a fixed fee of $250,000 plus an annual retainer. The advisor reviewed the company's research data, interviewed the directors and recommended changes to its financial reporting before admission.
After listing, the advisor held regular calls with the directors and caught an error in a draft announcement that would have understated a delay in a trial. The correction avoided a damaging reaction from investors. The chairman said that, although the retainer was a cost, the advisor had protected the company's reputation.
Over the following three years, Kestrel raised a further $10,000,000 through a placing of new shares to existing and new investors. The advisor helped it prepare the documents and advised on the announcement timetable so that the news reached the market at the right moment. The directors said the relationship worked best when they called early, before decisions were made, not after.
Watch out
Common mistakes.
- Thinking the nominated advisor is the company's lawyer or auditor. It is a separate role, approved by the exchange, with a duty to the market.
- Believing the advisor takes over compliance. Directors remain responsible for their company's behaviour.
- Choosing an advisor on price alone. Experience in your sector and the quality of the team matter more.
Questions
People also ask.
What does Nomad stand for?
It is short for nominated advisor, the term used for the approved advisor of a company listed on AIM.
Is a nominated advisor needed on the main London market?
No, the requirement belongs to AIM, where it replaces some of the rules found on the main market. The main market instead uses a more detailed rulebook set by the listing authority.
What happens if a company has no advisor?
Its shares can be suspended until it appoints a new one. The suspension can lead to the shares being removed from the market if the delay goes on too long.
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