Word: aim
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...London's dramatic renaissance as perhaps the world's leading financial center has been a well-documented phenomenon in recent years. But relatively little attention has been paid to just how important AIM has been to that resurgence. Launched by the London Stock Exchange (LSE) in 1995, AIM now lists more than 1,600 companies, five times the number of a decade ago. Turnover in its shares hit $114 billion in 2006, some way from the $3.8 billion bartered in its first full year. AIM attracted 198 initial public offerings last year, four times the number...
...AIM offers companies seeking capital a chance to dip into London's deep investor pool under lighter regulations than those on competing markets. That's got U.S. rivals in a spin. As overseas firms bypass New York to trade on AIM - which now lists more than 300 foreign companies, one-fifth of them from the U.S. - it has faced accusations of lax standards. In January, NYSE CEO John Thain claimed AIM "did not have any standards at all, and anyone could list." A month later, Roel Campos, a commissioner at the U.S. Securities and Exchange Commission, the stock-market regulator...
...AIM's way of vetting companies is hardly traditional. To float on the LSE's main market, a company normally needs a three-year business record, a minimum market cap and shareholder approval for big acquisitions or disposals; NASDAQ and NYSE have similar hurdles. But AIM's quality control is outsourced to 85 so-called Nominated Advisers, or Nomads. Generally accounting firms or financial management companies, Nomads scrutinize a firm's executive staff, business model and performance before deciding whether it can list. To a degree, NYSE's Thain is right: AIM has very few prescriptive requirements for listing...
...Since the Nomad's fees are paid for by the company wanting to be listed, it might seem AIM is built on a giant conflict of interest, but Nomads counter that traditional auditors and accountants are company-paid, too. In practice, says Philip Secrett, a partner at Grant Thornton Corporate Finance, one of the largest Nomads, only a "small minority" progress onto AIM; most are turned away for being too immature or unsound. And there is AIM's track record: around 3% of AIM-listed companies fail annually, a figure roughly comparable with the main market...
...AIM's advocates also say it strengthens regulations when warranted. Ernst & Young's index of AIM's oil and gas companies - around 7% of AIM's list - slid by 6% in 2006, a lingering reverberation from a series of shock announcements from energy firms that their reserves were dry. Last year the LSE began requesting such firms submit independent annual reports on their reserves...