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Prospectus Directive poses risk to AIM deals

UK junior market AIM could be hampered by tight interpretations of EU rules on what constitutes a public offer

Companies listing on the UK's Alternative Investment Market (AIM) could be forced to comply with Europe's Prospectus Directive despite the exchange's efforts to remove itself from the new regime. The Directive, which takes effect on July 1, would impose strict form and content rules on the smaller-cap growth market's issuers, requiring a comprehensive three-part prospectus and detailed financial information for deals worth more than €2.5 million or those offered to more than 100 investors.

AIM opted for exchange-regulated status in 2004 to prevent its listed companies from having to comply with the EU rules, which apply only to companies listed on an EU regulated exchange.

"This will start affecting deals as July 1 gets closer, but it is already a problem because some of the deals we are now working on will not come to market until after July 1 and so will have to comply with the new regime," says AIM specialist Anthony Brockbank, a partner at Field Fisher Waterhouse in London.

Outside scrutiny

Despite AIM's best efforts, uncertainty about what constitutes a public offer for the purposes of the directive could yet subject some issuers to extra regulatory scrutiny. The problem relates to AIM brokers with discretionary private clients, on whose behalf they invest.

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