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Why Companies are able to lie on AIM – the Failing Nomad System

By Tom Winnifrith, The Sheriff of AIM | Monday 11 August 2014


The way that the AIM Casino is set up is based on one great enormous conflict of interest and that is why companies can and do tell lies to investors – that is the Nomad (Nominated Advisor) system.

A company must, under AIM rules, have a Nomad. If its Nomad quits the shares are suspended. If no replacement Nomad is found within a month the stock is booted off the Cesspit for good. The Nomad must verify every statement that is put out by a company and ensure that it complies with the rules. As such it is the Nomad who is at the front line of regulation and it works FOR the LSE.

That is the theory but in practice it is not the LSE who pays the fees it is PLCs who must pay £20,000 to £50,000 a year.  And the reality is that there are too many Nomads in London and that running a Nomad has high fixed costs. One of the main costs is that you must employ a certain number of Qualified Execs (i.e. grotesquely overpaid corporate financiers). You need a minimum of 4 QEs and then for every x new clients you take on you must hire another QE.

Since there is a limited supply of those who qualify as QE’s they can charge a fortune. And do. The net result is that even in good times (i.e. lots of lucrative IPOs) very few Nomads are making much money. In bad times the staff still need to get paid but the windfall fees disappear and no-one makes any money.

It is the Nomads serving the bottom end of the Cesspit who are the most marginal operations. And it is the same Nomads who have the dodgiest clients – ones that really are not investment grade material and are prone to lying, cheating and fraud.

And so such Nomads face a real dilemma. If they report a client to AIM regulation for lying they will either see that company booted of AIM or it may just be censured. Or as it happens as this is the casino the odds are that nothing will happen. But if the company remains on AIM it will know that the Nomad has dobbed it in and will seek to move to a new Nomad.  The net result is that the Nomad has just lost a retainer.

If you are an employer asked for a reference for a crap employee you are certifiable if you risk legal action by saying that the person was useless. And so you just say “so and so worked for us between x& y as a whatever.” Ad so the bad penny moves on. If an AIM company switches Nomad the new Nomad will get an equally bland reference. That is just how the system works. Bad AIM stocks just work through the Nomads and there are always Nomads desperate enough for fees who will take a bad stock on.

And of course it is made worse in that company’s also need a retained broker under AIM rules. And most Nomads are also brokers. Brokers earn 5% commission on all sums raised. That is where the real cash is made. So if a Nomad kicks up a fuss about some lie or other the next £1 million placing is pulled. That would have earned the broker £50,000 for a couple of days work. Easy money.

This is the flaw at the heart of AIM: those who are meant to regulate are conflicted against regulating. The economics of the world in which they operate almost prevent them from asking too many questions. Meanwhile the FCA/AIM team do not have the resource to investigate in a forensic manner.

That is not to excuse the chocolate teapots of the regulation world. They are approached often enough by folks such as myself with cast iron evidence of PLC lying and fraud.  I know they also get about thirty requests a day from Quindell shareholders to investigate me but I also know where those are filed. The point is that there are cases that could be prosecuted. And were they to be done so in a very public manner that would serve to make CEOs who are tempted to lie think twice.

The fact is that right now, with the pretence that Nomads regulate known to be a pretence and with CEOs almost never publicly sanctioned and fired others see that lying/fraud is an activity with almost now downside risk.

The Nomad system has failed.   Is there an answer? Yes.

Firstly a company should not have to have a retained Nomad just a broker.

However it should need an FCA authorised corporate advisor to sign off on every release which they should charge for on a release by release basis. That would discourage companies from issuing non-news just to ramp the shares as it would have a real cost. If an advisor refuses to sign off on a release as it is unverifiable it should be forced to report that to the AIM team and failure to do so should see that advisor and the employees concerned losing their license.

Finally the FCA and AIM team should publically censure any CEO found to have lied/committed fraud on however small a scale and that person should be barred from sitting on the board of an AIM Casino company for life.

I suggest to you that after the first few prosecutions even perennial liars would stop lying for they would realise the enormity of the downside risk they face.

Will any of this happen? No. As such AIM investors should be aware that they are playing a game in a casino where there is now no regulation at all that protects them.

Tom Winnifrith has just published his new e-book, The 49 Golden Rules of Making Money from oil, gas and mining shares. You can buy it on Amazon for £6.25 or you can order a FREE copy HERE



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  1. Tom, please could you show me which rule in the AIM Rules for Nomads states that a Nomad must verify a RNS. I can’t find it and as far as I am aware there is no obligation on the Nomad to actually verify each RNS. There is a requirement to review a RNS and “ensure as far as is reasonably practical that they comply with the AIM Rules for Companies” but this is not the same as verification. If Nomads carried out the same level of verification that lawyers perform for admission documents, then this would not be reasonably practical as the costs would be far far higher than they are now. Unfortunately, Nomads are forced to take the directors’ word that they are not lying (having carried out sufficient DD on the directors to ensure that they are suitable for AIM and don’t have a history of lying); there is very little a Nomad can do to ensure that a RNS is 100% true if the directors are not being 100% truthful.
    I’d also be interested to know what salary qualifies as being “grossly overpaid” for a QE. Not many QEs I know are on more than £100k which is admittedly a lot compared to the national average but not compared to other corporate financiers in the City, especially considering most of them are ex lawyers and accountants.

  2. Woody

    Q1. See here

    Q2. Struggling by on 100k per annum. The poor lambs. I am almost in tears as I think about such poverty. Sod Children in Need lets go organise a charity day to help these poor souls facing financial hardship on just 100k per annum.

    I know lets have a windfall tax on ordinary workers earning 26k per annum so that we can arrange emergency relief for QEs on a mere 100k (plus bonuses).

    c) Where are the investors’s yachts?


  3. Drunken Sailor


    Nice article. I know of one Nomad who effectively sacked their client:. Fox-Davies told TXO to go and find another Nomad and broker. It took several months for them to find their current Nomad – Northland Capital. I went to see them about a month after they had taken TXO on. They got a very comprehensive rundown on their new client. They then placed £500k of shares and took a load of free warrants for themselves in the process – the warrants are so far under water they will never get exercised, it really does make you wonder if the QEs really are in anyway as smart as they claim to be!. Grossly overpaid on £100k seems about right to me, until you look at what some of the dodgy directors like Tim Baldwin trouser in fees and related party transactions for delivering nothing but failure.

    They are not all bad though, Nick Naylor and Mark Connelly at Allenby did all the right things when I informed them about Tim’s little trick of e-mailing out the CTFA placing presentation to all and sundry. Funnily enough I got my first lawyer’s letter shortly after that, as if Tim would have the guts to actually serve when he knows I have soooo much dirt on him (I really do not need you to fight my libel battles, I have masses of assistance already and am still bemused where you get the idea that I want you to)

    If we keep up the pressure on the Nomads of scoundrel companies eventually they will pull the plug on them, as it just is not worth the hassle.

    RAM’s Nomad pulled the plug on them, scuppering Tim’s final attempt to get back into the shell that remained after he destroyed any chance they may have had of rescue. You probably stopped following that debacle after you “changed teams”. T1ps did have over 6% of RAM at one stage, but there is no point making mistakes unless we learn from them is there.

  4. mhinder bhopal

    totally agree, what a corrupt system

  5. Q1. Your link doesn’t show that a Nomad must actually verify the RNS. Those are all fluffy vague obligations meaning a Nomad can still fulfill its duties under the rules without verifying the RNS. Stating the Nomad must verify all RNS statements and claiming this is the case when complaining to AIM is simply incorrect. I notice all your open letters make this point but AIM won’t take any notice because this is not a rule. Personally I think the rules should change and I think your regulatory idea is not a bad one but that would probably result in higher costs.
    Q2. Fair enough, that’s your opinion but I think that would be a max of £100k including bonuses and the vast majority would be on far less. Small cap broking is generally poorly paid compared to the rest of the City and compared to those directors with their snouts in the trough. Fund managers, salesmen, traders and analysts tend to earn more, even at small firms. Of course £100k (I repeat, that would be at the top end for a QE including bonuses) is a lot of money compared to 95% of the country but certainly not 95% of people with equal qualifications and experience.
    c. Agree 100%!

  6. Drunken Sailor


    The system is not corrupt, it is just mostly ineffective. But it is not just AIM – do you remember all those banks a few years ago who put out announcements saying their balance sheets were in good shape just before they needed massive bailouts / did rights issues / went bust?

    Unfortunately the city is full of people whose first instinct is to bend the truth. It is good to see one of them change teams and start to speak out, albeit as a vigilante with his own agenda and not a sheriff.. A lot of people do not like the messenger and many do not want to hear the message, however that does not make the message wrong.

    AIM could be a great source of funding for the UK’s most innovative and fastest growing companies, but only if the crooks and complete incompetents can be driven away. The city itself does not have the will to do it and the politicians are insufficiently interested. However it has been about a year since AIM shares were permitted in ISAs and as the number of ordinary people, who have seen their future comfort stolen from them by people who quite frankly are not fit to be directors of any company, whilst the regulatory system stood by and allowed it to happen, grows then just maybe the politicians may pluck up the courage to do something about it. The trouble is rather than taking the fairly easy and pragmatic measures Tom has suggested, they will go for a complex system of even more expensive and only marginally more effective regulation that destroys the whole point of AIM.

    In the meantime all we can do is fight the good fight, whilst doing thorough research. Tom refers to the AIM Casino, It is not a complete lottery and is more like a horse race. The trick is not to back the jockeys who have fallen off in every race they have ever ridden, but to back the ones that normally win. Nobody can have a 100% winning record and nobody can really apply themselves to more than a few companies at a time. There are a number of websites that can give you detailed background on directors – I use duedil. My Bete Noir Tim Baldwin has had 43 directorships 34 have failed, and the remaining 9 are in varying degrees of distress (Tom knows this as he backed quite a few of them in his former life). I have asked the question many times if anyone can name a single venture of Tim’s that has actually made money for investors (Tim and his cronies often make a decent wedge in fees and related party transactions as he sucks them dry) and nobody can name a single one. Even what looked like a great move at the time – the reverse of IM minerals into Pathfinder (Tom’s Gold fund was involved in that) turned into a complete shambles as it looks like IM only had paid for an option to buy the shares in the company that held the licence and had not actually bought the shares – that is still dragging its way through the Mozambique courts, so I will not comment further, other than to offer the observation that potential investors should be very wary of directors who always seem to end up in some form of court battle or other – only the lawyers ever really win.

    If we take Tom’s Bete Noir – Rob Terry, the summary comes up as “Robert has held 110 directorships, 46 of which are currently active, and 64 are no longer active.” Now you do need to dig into those figures to really understand what underlies them. .Some of those non active directorships may be companies that he has built from scratch and then flogged on making a tidy sum for all his investors, equally they may be crash and burns which have lost everything for creditors and investors. Only 13 of the 64 are ones where Rob went down with the ship, but one of Tim Baldwin’s tricks is to retire before the ship sinks so he only has to admit to being a former director. Thus there is a lot of in depth research to do to find the winning jockeys, but they are the only ones that are worth backing.

  7. DS

    Just to correct you.

    Pathfinder – bought & sold out at a profit in the post TB era.

    RAM – yup I got that wrong.

    I do learn from my errors about what companies I might endorse

    Anything else from what is now 4 years ago you want to mention?


  8. Drunken Sailor


    Glad you managed to get out quickly enough on Pathfinder, shame Tim did not and is left holding so many nearly worthless shares – one of the things that caused the downfall of Hill St investments – what a house of cards that little lot was, the only surprise was it took so long to collapse, but it was propped up by another crony Bruce Gordon.

    How did you like my horse race vs your casino analogy and the advice that stems from it?

  9. Drunken Sailor


    The rules for Nomads are indeed very woolly and I have not found an AIM rule that makes it clear that companies are not allowed to mislead the market – most companies do not outright lie in RNS’s (they normally leave that to non regulated PR, which Nomads have no control over) they just use deliberately ambiguous wording eg rather than saying such and such company we have invested in is doing really well, they say we have been informed by such and such company that we are invested in that they are doing really well. Such and such company can be going down the drain, but all that is needed is an e-mail saying they are doing well and the RNS has not lied. It gets even more amusing when it is the same directors on the boards of the companies that they are reporting as though they are completely different companies. This is one of the things that happens when a house of cards is created through a load of paper swaps. It is another danger sign to watch out for.

    Anyway the line I use with Nomads, as I remind them of their responsibilities, is to commend to them a link to the AIM rules for Nomads and ask “What do you interpret by

    “Overriding principle of the preservation of the reputation and integrity of AIM” ?

    Is it something a prospective NOMAD needs to pretend to hold dear when applying to become a NOMAD and then pay lip service to thereafter or does it mean something?

    How do you think the reputation and integrity of AIM has been impacted by …..”

    The slight flaw in that argument is that if you accept that AIM’s reputation is that of being a cesspit full of companies with no integrity, then the actions of the company you are complaining about have probably enhanced that reputation.

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