Opening the AIM primary market to personal investors will help SME financing

At the London Stock Exchange (LSE) Annual Meeting this afternoon [18 July 2012], Gavin Oldham, chief executive at The Share Centre, calls for the opening of the AIM primary market to personal investors.

"Recent Compeer research has shown that around 40% of all secondary market equity transactions carried out through execution-only retail stockbrokers are in AIM or small cap companies. This compares with approximately 15% in traditional stockbrokers, probably reflecting the caution of their compliance departments in respect of their advisory and discretionary roles.

"However, because virtually all primary market activity in AIM shares is in the form of placings, the only personal investors who get direct access to these new issues and non pre-empted rights issues are clients of traditional stockbrokers. Customers of execution-only retail stockbrokers are denied all access to placings.

"This is not only an injustice to those personal investors who provide most liquidity in the secondary market, but it also results in issuing companies not receiving the maximum  demand and the best prices for their shares. It is, of course, only primary market activity which results in new money flowing into these SMEs, most of which are British.

"At a time when banks are frequently accused of holding back on SME finance, this is illogical. It is therefore proposed that BIS (Department for Business, Innovation and Skills), the LSE and the FSA should carry out an urgent review of how the AIM and small cap primary market can be opened to personal investors who are customers of execution-only retail stockbrokers.

"There are a number of actions which sould be taken:

to require a proportion of each capital raising (except for pre-emption rights issues and entitlements) over, say, €5m to be issued by way of open offer;

to simplify prospectus requirements for all open offers raising less than £100m to the maximum possible under EU legislation;

all such open offers to be conducted electronically, thus avoiding the need for pre-registration and printing/postage."