The London Stock Exchange is to bring in regulations making it easier to take disciplinary action against brokers that bring unsuccessful companies to the Alternative Investment Market.
The change is part of a tightening of rules governing the nominated advisers, or nomads, that oversee companies coming to AIM, which is administered by the LSE.
No details are being given at this stage, but a consultation exercise has identified the need to produce a rule book governing nomads alone rather than AIM companies themselves.
There have been complaints from investors that, as AIM has expanded to about 1,600 companies, quality has been reduced. This has been reflected by a number of poor performers or high-profile failures, especially in areas such as minerals extraction and oil and gas.
In addition, such companies increasingly are coming from overseas, raising the question of whether the assets that they possess are sufficiently well scrutinised from London.
The poor performers have dragged down AIM as a whole, with the main benchmark showing little progress over the year. The LSE is known to be progressing with several disciplinary actions against AIM nomads under the existing rules for earlier failures.
Initial figures seen by The Times suggest that AIM is well on the way to another record year. In 2006, £14.2 billion was raised, a sharp jump from £8.94 billion in 2005, itself a record.
The new rules governing nomads, of which there are about 90, are designed to make disciplinary action easier when things go wrong by more closely identifying their duties. They will be required to check more carefully companies’ and executives’ backgrounds and, where they are from overseas, carry out site visits of production facilities.
An LSE spokesman said: “This is best practice as done by the vast majority of the market. Nomads must assess the suitability of companies that come to market.”
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