Companies looking to list on London's Alternative Investment Market (Aim) have had a shot put across their bows by the London Stock Exchange (LSE).
The LSE signalled a clampdown on the fast-growing AIM this week by issuing its first public rebuke of a nominated adviser for breaching the rules.
It censured the former boutique investment bank Durlacher for sitting on a profits warning last year by its client - Prestbury Holdings, the Aim-listed financial services company - for eight days while the company carried out a private fundraising.
This is part of the LSE attempt to boost observance of rules on Aim and to distance the market from its wild west image as it attracts new companies from Britain and abroad.
AIM, which is targeted at smaller companies, has proved particularly attractive to Irish companies looking for access to a public listing - evidenced by the debut on the market yesterday of buy-to-let investment group Ely Property. Its success has forced the Irish Stock Exchange to revamp its product offering in an effort to stem the flow of Irish companies listing outside the State. Its most recent innovation, the Irish Enterprise Exchange (IEX) has struggled to compete, although it did secure the listing this week of Fitzwillian Capital.
Fitzwilliam listed on AIM at the same time.
The LSE said Durlacher also failed to advise Prestbury to issue the profits warning even when its shares fell in one day from 54p (78c) to 39.5p. The day afterwards, when the announcement was made and the £500,000 fundraising was complete, the shares plunged by two-thirds, to 14p.
That announcement, made by Francis Maude, Prestbury chairman and now chairman of the Conservative Party, said half- and full-year results would fall "significantly short" of market expectations.
The LSE said Durlacher acted in good faith, but declined to elaborate. Lee Birkett, chief executive of Prestbury, said Durlacher's breach of the rules was possibly an "administrative error". Prestbury was not censured by the LSE.
Nick Bayley, head of trading services at the LSE, which operates Aim, said it was the first time a "nomad", as the advisers are known, had been publicly censured, and was a message to them "to do their jobs properly".
He said the advisers had a critical role in guiding Aim-listed companies carefully, because the market is less regulated than the official markets. "I hope it will send a strong message."
Former Durlacher executives were not available for comment. Since its breach of the rules, Durlacher has become part of Panmure Gordon, the stockbroker, which shrugged it off as a "legacy issue".
Mr Birkett said the real victims were Prestbury shareholders. The £500,000 placing was to Armadillo Investments, which is still the company's second-largest shareholder after Mr Birkett, according to Hemscott.
Nick Bayley, head of trading services at the LSE, told the FT the public censure was intended to send a strong message that nominated advisors, known as nomads, had to do their jobs properly on Aim, which is less regulated than the main market. He said: "It's the first time we've done it, but it will not be the last."
He added the pressure on the LSE to take action against abuses had grown partly because of the success of Aim, which in recent years has become a mainstream market of choice for national and international companies.
The LSE's warning to nomads was amplified on Monday by news that it had privately censured three Aim companies and one other nomad. One company was fined £10,000 and another £5,000 for breaching Aim rules.
