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The Alternative Investment Market (AIM) is a sub-market of the London Stock Exchange, allowing smaller companies to float shares with a more flexible regulatory system than is applicable to the Main Market. The AIM was launched in 1995 and has raised almost £24 billion for more than 2,200 companies. Flexibility is provided by less regulation and no requirements for capitalization or number of shares issued. Some companies have since moved on to join the Main Market, although in the last few years, significantly more companies transferred from the Main Market to the AIM (The AIM has significant tax advantages for investors, as well as less regulatory burden for the companies themselves). In 2005, 40 companies moved directly from the Main Market to the AIM, while only two companies moved from the AIM to the Main Market.

The AIM has also started to become an international exchange, often due to its low-regulatory burden, especially in relation to the Sarbanes-Oxley Act (though only a quarter of AIM-listed companies would qualify to list on a U.S. stock exchange even prior to passage of the Sarbanes-Oxley Act^[1]). As of December 2005 over 270 foreign companies had been admitted to the Alternative Investment Market.

The independent FTSE Group maintains three indices for measuring the AIM, which are the FTSE AIM UK 50 Index, FTSE AIM 100 Index, and FTSE AIM All-Share Index.

In March 2007, U.S. securities regulator Roel Campos suggested that AIM's rules for share trading have created a market like a "casino". Campos reportedly said: "I'm concerned that 30% of issuers that list on Aim are gone in a year. That feels like a casino to me and I believe that investors will treat it as such.".^[2] The comment resulted in several angry retorts, including one from the LSE, which controls AIM, pointing out that the number of companies that go into liquidation or administration in a year is actually fewer than 2%.

AIM has since issued new rules requiring that listed companies maintain a website [1].

In October 2003, Evolution Beeson Gregory (now Evolution) shorted shares in Room Service Group plc, an AIM listed company. It was later revealed that Evolution had established a short position equal to 252% of the issued share capital of Room Service.^[3] The Financial Services Authority ('FSA') found Evolution guilty of the financial crime of Market Distortion and fined them £500,000 ($1 million) and their chief market maker, Christopher Potts £75,000 ($150,000).^[4][5]

With the approval of the FSA, the AIM created a Settlement Offer. However, it was later revealed in the High Court that the AIM had rigged the valuation of the Settlement Offer against the interests of the victims of the financial crime and then lied to them about this on three occasions.^[6] A claim was brought against the London Stock Exchange and is presently before the European Court of Human Rights.^[7]

The AIM has come under additional criticism for allowing Langbar International to be listed.^[8] At £375 million ($750m) Langbar is the biggest share fraud on the Exchange to date. It is presently being investigated by the Serious Fraud Office^[9][10][11] and the City of London Police. It was discovered in November 2005, that Langbar had none of the assets it declared at listing and this was due in part to the failure of the Nomad (Nominated Adviser) to carry out Due Diligence and the Exchange failing to ensure that the AIM rules had been complied with. After the fraud was uncovered, the AIM changed the rules for Nomads in 2006^[12][13][14] and on 19 October 2007 they fined Nabarro Wells £250,000 ($500,000), and publicly censured them for breaches of the AIM rules.^[15][16][17]

In March 2007 the Daily Telegraph noticed a tendency to use listing vehicles incorporated in Offshore Financial Centres prior to floating on AIM. Some 35% of the companies floated on AIM during 2006 were from OFCs, of which the majority came from the Channel Islands or the British Virgin Islands.^[18]

1. ^ Doidge, Karolyi and Stulz "Has New York Become Less Competitive in Global Markets? Evaluating Foreign Listing Choices over Time"
2. ^ Treanor, Jill "City hits out over US 'casino' jibe at Aim" The Guardian 10 March 2007
3. ^ FSA Final Notice 12 November 2004
4. ^ "FSA fines broker for market abuse" BBC News 15 November 2004
5. ^ "Evolution loses top man after FSA fine" Daily Telegraph 24 November 2004
6. ^ "Small Talk: Blue skies beckon for Azure Holdings" The Independent 31 July 2006
7. ^ "Small Talk: David and Goliath court battle may end in European rematch" The Independent 7 August 2006
8. ^ "Has the Langbar scandal damaged AIM's healthy reputation?" The Lawyer 24 September 2007
9. ^ Serious Fraud Office Press Releases 29 November 2005
10. ^ "Fraud inquiry starts into shell firm's missing millions" The Guardian 26 November 2005
11. ^ "Langbar: The SFO are called in" Yorkshire Post 29 November 2005
12. ^ "Sharewatch: LSE takes AIM" The Sunday Times 2 July 2006
13. ^ "Inside the City: Rogue nomads in the firing line" The Sunday Times 2 July 2006
14. ^ "LSE takes aim at nomads to quell concerns" Daily Telegraph 3 October 2006
15. ^ "Nomad strayed from market rules" Financial Times 19 October 2007
16. ^ "Nabarro Wells censured by LSE over listing" Evening Standard 19 October 2007
17. ^ LSE hits Nabarro Wells with £250,000 fine over AIM checks" The Times 20 October 2007
18. ^ Essen, Yvette "Aim market: Offshore attractions for the 'sophisticated' investor" 12/03/2007

• Growth Enterprise Market of Hong Kong
• Nominated Adviser (NOMAD)

• AIM homesite (English)
• FTSE Group website
• MoneyWeek Magazine Alternative Investments
• "Aim for the ambitious", The Daily Telegraph, 25 May 2005.