Nominated Adviser (Nomad)

A Nominated Adviser (also known as a 'Nomad') is a unique and powerful type of advisory firm that is a mandatory requirement for any company wishing to list its shares on the London Stock Exchange's Alternative Investment Market (AIM). Think of them as the gatekeepers and chaperones of the AIM market. These firms, which are approved and regulated by the London Stock Exchange, are responsible for assessing a company's suitability for a public listing, guiding it through the entire Initial Public Offering (IPO) process, and then continuing to advise and monitor the company to ensure it complies with market rules on an ongoing basis. The Nomad's role is fundamental; without one, a company cannot join or remain on AIM. Their own reputation is directly tied to the quality and integrity of the companies they bring to the market, making their judgment a crucial first line of defense for investors.

A Nomad wears two very important hats for every company it represents: that of a trusted coach and a strict referee. This dual role is what makes the AIM market distinct and is a critical concept for investors to grasp.

Before a company goes public on AIM, the Nomad acts as its primary coach. It works intensively with the company's management to prepare it for the rigors of public life. This involves:

• Conducting extensive due diligence to ensure the business is sound and its financial statements are accurate.
• Helping to write the AIM Admission Document, which is the key legal and financial prospectus for potential investors.
• Ensuring the company's directors understand their legal and regulatory responsibilities regarding corporate governance and timely disclosure of information.
• Valuing the company and helping to structure the IPO to attract investment.

Once the company is listed, the Nomad switches to a more regulatory role, acting as the market's referee. It becomes the first point of contact between the company and the stock exchange. The Nomad is responsible for ensuring the company adheres to the AIM Rules for Companies at all times. If a company is late with its results or fails to announce a significant development, it is the Nomad's job to intervene. In a worst-case scenario, if a Nomad believes a company is no longer suitable for the market or is breaking the rules, it can resign. The resignation of a Nomad is a huge red flag, as it triggers an immediate suspension of the company's shares. If a replacement isn't found quickly, the company's shares will be delisted.

For a value investor, looking beyond the balance sheet to assess the quality of management and governance is paramount. The choice and stability of a company's Nomad can be a surprisingly useful shortcut in this analysis.

• A Proxy for Quality: The market for Nomads is competitive. Top-tier, highly respected Nomads have valuable reputations to protect and are therefore very selective about their clients. When a reputable Nomad sponsors a company, it’s a positive signal that a thorough vetting process has occurred.
• The “Revolving Door” Red Flag: A company that frequently changes its Nomad is a cause for serious concern. It can suggest disagreements over strategy, financial reporting, or compliance. An investor should always investigate the reasons for such a change.
• Skin in the Game: While not a direct financial investment, a Nomad has significant “reputational capital” at stake with every client. A string of failed or fraudulent client companies can destroy a Nomad's business. This alignment of interests provides a layer of protection for investors, as the Nomad is incentivized to ensure its clients behave properly. You can easily find the name of a company's Nomad in any of its official regulatory announcements.

It's common to see the Nomad mentioned alongside the company's Corporate Broker. While the same firm often provides both services, the roles are distinct. The Nomad is focused on regulation, compliance, and corporate advice. The Corporate Broker, on the other hand, is the company's link to the financial markets. Their job is to understand market sentiment, provide feedback on the share price, and connect the company with institutional and private investors to buy and sell its shares. Understanding this distinction helps you appreciate that the Nomad is there to protect the integrity of the market, while the broker is there to promote the company within that market.