Nabarro Wells & Co Ltd fined £250,000
Nabarro Wells & Co Ltd, an AIM nominated adviser (‘Nomad’), has today been fined £250,000 and publicly censured in respect of its conduct. Nabarro Wells has been found to have breached AIM Rule 39 and Part 2 of the Eligibility Criteria for Nomads which were in force at the relevant time.
The fine and public censure were imposed on Nabarro Wells because:
- their systems and controls did not satisfy the Eligibility Criteria;
- they failed to act with due skill and care;
- they failed to undertake the necessary level of due diligence to assess the appropriateness of certain companies for admission to AIM; and
- they failed to make due and careful enquiry into whether certain AIM companies’ admission documents complied with the AIM rules.
Martin Graham, Head of AIM, said:
“The Exchange takes regulation of AIM extremely seriously. Nomads fulfil a vital role in maintaining the quality of companies admitted to AIM and providing advice and guidance to AIM companies about their responsibilities under the AIM rules. It is therefore fundamental that Nomads act with due skill and care at all times. The Exchange has an active programme of Nomad monitoring and, where we find failings, we will take action. “
A formal review by the Exchange of Nabarro Wells was carried out during 2006. For the purposes of the formal review, the Exchange selected seven AIM companies for which Nabarro Wells acted as Nomad for detailed examination. As a result of the formal review, the Exchange found material breaches by Nabarro Wells of the AIM rules in respect of five of the seven companies selected. The Exchange has made no finding of wrongdoing against any of these companies.
Some examples of the breaches include:
· inadequate due diligence into a company and its directors in the form of insufficient enquiries into omissions in the directors’ questionnaires and the identity of the controlling shareholder;
· inadequate consideration of the experience of the Board of a company before its admission to AIM;
· not being sufficiently involved in the preparation of the admission document of a company;
· inadequate consideration of the appropriateness of a company for AIM, in light of the company’s inability to raise the required funds on admission which were necessary to achieve the assumed growth projections;
· upon a previously announced transaction aborting, which would have amounted to a reverse takeover, advising the company that the termination of the transaction need not be announced immediately but rather could be included in a future announcement;
· not advising a company of its obligations to update the market under AIM Rule 11 when previously assumed subscription monies were not received.
In reaching this public censure and financial penalty, the Exchange acknowledges Nabarro Wells’ open and co-operative approach during the review.
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Notes to editors:
1. Further detail of the breaches can be found in the Consent Order
2. Relevant Regulatory Provisions
Under AIM Rules 43 and 44 of the AIM Rules for Companies in force at the relevant time (“AIM Rules”), if the Exchange considers that a Nomad has breached its responsibilities under the AIM Rules, it can refer the matter to the ADC.
Under the AIM Disciplinary Procedures and Appeals Handbook, if the ADC finds, on the balance of probabilities, that the Nomad has breached the AIM Rules or that the integrity and reputation of AIM has been or may be impaired as a result of its conduct or judgement it may impose one or more of the following sanctions:
· a fine;
· a censure;
· remove the Nomad from the register; and/or
· publish the action it has taken and the reasons for such action.
Under AIM Rule 39, a Nomad must confirm to the Exchange, inter alia, the following information in relation to any company producing an AIM admission document:
· that in its opinion, it is satisfied that the applicant company and the securities are appropriate to be admitted to AIM; and
· that to the best of its knowledge and belief, having made due and careful enquiry, all relevant requirements of the AIM Rules have been complied with.
Under AIM Rule 39, a Nomad must act with due skill and care at all times.
Under AIM Rule 39, a Nomad must abide by the Eligibility Criteria at all times. Under the Eligibility Criteria, a Nomad must:
· ensure that it maintains procedures which are sufficient for it to discharge its ongoing obligations under the Eligibility Criteria, which includes an obligation to abide by its responsibilities under the AIM Rules;
· retain sufficient records to maintain an audit trail of the advice which it has given to the AIM companies for which it acts as Nomad; and
· ensure that it has sufficient corporate finance staff to discharge its obligations as a Nomad.
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