Advisers get ready for policy shift as LSE tightens regulation

If the proposals are endorsed, the market, which has about 80 NOMADS, will
have to abide by a rule book specifically catering for the junior exchange.

LSE policy-makers are looking to reinforce market controls in a bid to
protect investors from sinking their cash into businesses that have failed to
live up to forecasts. Concerns that the changes would further extend the gulf
between advisers from mid-tier firms and the Big Four have been firmly rejected.

Adam Hart, of KBC Peel Hunt, said: ‘To coin a popular phrase, this is
evolution not revolution. There’s nothing there that scares me at all. These
rules are just putting into print what my colleagues and I use already.

‘The changes will not only hold all nomads to the same set of rules, but it
will allow new advisers to see exactly what’s expected of them.’

He warned: ‘If there’s continued corner-cutting it could see businesses
implode. This is a grown-up market now, it’s not the Wild West any more and
appropriate levels of due diligence are necessary.’

AIM’s appeal for newly public companies currently relies on its greater
flexibility compared to the main-list, but that latitude has only been granted
because NOMADs were entrusted with the responsibility of making sure new
entrants came up to par.

But in recent years, the quality of some companies has dropped. A Richmond
Energy Partners study into AIM’s popular oil and gas sector showed that oil
companies listed in the past two years had delivered an average loss of 5%,
despite higher average oil prices.

It said: ‘The performance of recent initial public offerings shows that the
quality has become much more variable and investors need to be much more
selective about the companies they invest in.’

The LSE’s consultation is set to continue for the next two months and if
agreed with marketparticipants, the new rules will come into force at the
beginning of 2007.

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