What is a Nominated Advisor (NOMAD)?
A Nominated Advisor (NOMAD) refers to a financial services firm that a company utilizes to be placed on the London Stock Exchange’s Alternative Investment Market (AIM). To be listed on the AIM, it is a requirement to employ a NOMAD that is pre-approved by the London Stock Exchange (LSE). Once the company is listed on the AIM, the nominated advisor is responsible for regulating the company.
Why Companies Want to Be Listed on the AIM
The AIM was established in 1995 by the London Stock Exchange. The new submarket was created to enable emerging growth companies to raise capital. Companies were able to achieve it, as well as take advantage of the lower listing requirements required by the AIM.
Companies worldwide list on the AIM, and the listings continue to grow. In the past five years, the average amount of capital raised on the AIM was GBP21.5 million. In addition, the average daily trading volume on the exchange in the past year was GBP2.4 billion.
The Role of a Nominated Advisor
A nominated advisor is a corporate finance advisor that is pre-approved by the London Stock Exchange to admit a company to the AIM. To become a NOMAD, a firm must meet the following criteria:
- Must be a firm or company – a NOMAD cannot be an individual;
- Practiced corporate finance for at least the past two years;
- Acted on at least three relevant transactions in the past two years; and
- Employ at least four qualified executives.
After being appointed a NOMAD for a company, the advisor becomes responsible for advising and guiding the company on the responsibilities it assumes to be admitted to the AIM. The responsibilities mainly include (the AIM officially imposes 45 rules):
- Retention of a Regulatory Information Service provider to ensure disclosure information can be notified as and when required (AIM Rule 10)
- Pay ongoing AIM fees set by the London Stock Exchange as soon as such payments become due (AIM Rule 37)
- Requirement to submit further admission documentation for additional issues of securities if the new issues require a prospectus, are seeking admission as a new class, or are undertaking a reverse takeover (AIM Rule 27)
- Requirement to publish annual audited accounts which must be sent to shareholders no later than six months after the end of the financial year (AIM Rule 19)
In addition, they will consistently advise the company of its obligations once it is on the AIM. To accomplish it, a NOMAD’s tasks will usually include:
- Performing extensive due diligence to ensure a company is a suitable fit for the AIM;
- Providing guidance throughout the flotation process;
- Preparing the company for being listed on a public market;
- Helping prepare AIM admission documentation;
- Confirming that the company is a proper fit for the LSE; and
- Acting as the primary regulator for a company throughout its time on the AIM.
So, to summarize, the NOMAD first begins by assisting the company in navigating the AIM listing process. The NOMAD will then perform due diligence to ensure the company is a proper fit for the AIM and that they will be successful after listing.
After the company is listed on the AIM, the NOMAD is responsible for monitoring the company and ensuring it continues to comply with the AIM Rules. More than 3,865 companies are listed on the AIM worldwide, so the need for NOMADs continues to be extremely important.
In addition to employing a nominated advisor, a company seeking to be listed on the AIM should also employ a broker, accountant, and legal advisor. They differ from a NOMAD in the following ways:
- Brokers specialize in bringing buyers and sellers together and are not involved with the extensive responsibilities of a NOMAD.
- Accountants are independent, third-party observers that aim to provide reliable financial information to shareholders. They assist the company in preparing the financial statements for distribution.
- A legal advisor assists with the verification of statements and provides direction and advice to board members of the company.
Real-World Example of a NOMAD
Nominated advisors are essential to a company’s success on the AIM. In fact, the AIM requires the employment of a NOMAD to continue to be listed on the AIM.
On May 20, 2020, a casino supplier, Nektan, was removed from the AIM after it did not appoint a new NOMAD within one month of entering the exchange. It was in direct violation of AIM Rule 1, which states “admission of a company’s securities to trading will be canceled if a replacement NOMAD is not appointed within a month.”
Nektan’s original NOMAD, Shore Capital and Corporate, resigned in April 2020, and Nektan was unable to enroll a new NOMAD. As such, they were suspended from the exchange.
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