What Is a Nominated Advisor (NOMAD)?
A nominated advisor (NOMAD) is a financial services firm that assists with listing a company onto the Alternative Investment Market (AIM) of the London Stock Exchange (LSE). The Alternative Investment Market is a specialized unit of the LSE catering to smaller, more risky companies.
The LSE requires that a company seeking a listing on AIM have a NOMAD, which the LSE itself must approve to carry out the functions. Once listed on the AIM, the NOMAD oversees the company and ensures they follow regulations. NOMADs are thus seen as the regulatory system for the less-stringent AIM market and are tasked with advising companies both pre-IPO and after listing.
- A nominated advisor is a financial services firm that shepherds a company onto the LSE's Alternative Investment Market (AIM).
- NOMADs are corporate finance advisors, who are usually boutique investment banks.
- Companies that want to list on the AIM must retain NOMADs as per LSE requirements.
- The NOMAD continues to monitor its client even after successfully listing on the AIM.
- NOMADs must meet certain criteria to qualify.
How a Nominated Advisor Works
The Alternative Investment Market (AIM) was established in 1995 by the London Stock Exchange to enable emerging growth companies to raise capital. The AIM is considered to be a submarket of the LSE. Well over 3,500 such companies from around the world have taken advantage of the lower listing requirements offered by this alternative exchange. However, there is a rule that a company must retain the services of a NOMAD to help guide it through the AIM listing process.
A NOMAD is a corporate finance advisor, usually a boutique investment bank, which conducts thorough due diligence for the suitability of an AIM applicant for the exchange. If satisfied with the company's business model, financial and operating track record, the competence of executives and directors, and intended capital structure, the NOMAD will assist the company in its preparation and application for admission to the AIM.
If the company and NOMAD are successful in their efforts, the NOMAD will continue to monitor its client—this is a requirement of the LSE. The NOMAD must act as the regulator, ensuring that the company complies with AIM rules at all times. The NOMAD also serves an ongoing role of providing advice on business operational or financial strategy.
Companies must retain NOMAD services to help guide them through the AIM listing process.
As of May 2021, there are 28 NOMADs approved by the LSE. The following are noted criteria for an entity to be considered a NOMAD:
- It must be a firm or company, not an individual.
- The company must be involved in corporate finance for at least two years.
- It must have acted as a financial advisor in at least three qualified transactions in two years.
- The firm must employ at least four qualified executives.
Along with a NOMAD, companies that want to join the AIM should consider retaining a broker, an accountant, and a legal adviser. Brokers are also members of the LSE and are required to be from the same firm as the NOMAD. Brokers are responsible to bring buyers and sellers together. Accountants are independent of the company and monitor the company's financials. The accountant also helps the company prepare any and all financial documents required of it. Finally, the legal adviser takes care of any verifications of statements as well as providing direction and advice to the company's board members.