An organisation representing shareholders has called for a reformation of the Aim market to improve the quality of listed companies and prevent investors losing money.
Sharesoc has launched a campaign listing a number of proposals which it wants to see enacted to improve the Aim market, without imposing large costs on the listed companies.
According to the organisation, less than a third of the 3,500 companies which joined Aim in the last 20 years are still listed.
Roger Lawson, deputy chairman of Sharesoc, pointed out that - while some may have moved to the main market or will have been taken over by other firms - there was still a very large turnover in Aim companies, with some going bust or being delisted.
“New companies often go onto Aim with no established business model and often with no revenue.”
He said it was not easy for investors to pick out the quality companies which will give a good return, and described Aim - which is managed by the London Stock Exchange - as a “minefield for inexperienced investors”.
According to Mr Lawson, the Aim index has underperformed main market indices since it launched 20 years ago, and he said its reputation “puts off good quality companies from listing on it”.
“Small and medium-sized companies that wish to raise equity for expansion are often discouraged from listing on Aim and this is damaging for the health of the UK economy.”
He also said the ethics of those involved in some Aim companies seem “dubious”.
“The Aim market seems to be run for the benefit of the London Stock Exchange, for company brokers, for private investor stockbrokers and of course for the company directors, but not for outside investors.”
Sharesoc’s recommendations include:
• Improved enforcement of Aim regulations.
• A corporate governance code should be introduced.
• Directors remuneration should be reported and votes required to approve it at annual general meetings.
• Aim company directors should have knowledge of UK company law.
• Share placings should be constrained.
• New listings should be vetted by an independent panel.
• Non-executive directors should be clearly independent and have a limited number of roles.
• General meetings should be held within the UK and at convenient dates and times.
• All Aim company directors should be fluent in English.
Sharesoc has asked shareholders to support the campaign by registering their interest.
A spokesman for the London Stock Exchange rejected the characterisation of Aim in the Sharesoc campaign, adding “it does not reflect the track record of both companies and investors participating in Aim”.
“Companies on Aim are subject to a regulatory framework not dissimilar to the rules for the main market, with London Stock Exchange, the Financial Conduct Authority, Financial Reporting Council and a number of other UK regulatory bodies and laws playing a role.
“Investing equity in growth companies, by definition, requires investors to evaluate the balance of risk versus the reward of investing in these companies. Indeed, risk is a feature of all markets, not just Aim.”