A nominated advisor (NOMAD) is a type of corporate advisor, such as a boutique finance firm, investment bank, or accounting firm, which helps international companies get listed on a branch of the London Stock Exchange (LSE).
NOMADs have to be approved by the LSE, and they assist smaller, riskier companies gain access to public capital through an initial public offering or IPO on the Alternative Investment Market, or AIM, which is less stringent compared to larger exchanges.
The NOMAD determines whether the company can be listed on AIM, even if the company will not IPO. If the company ends up pursuing an IPO, the NOMAD advises the company through the AIM IPO process and afterward. Here’s how the process works.
Recommended: What Is the IPO Process?
Nominated Advisor (NOMAD), Explained
NOMADs or Nominated Advisors determine whether a company should be admitted on LSE’s AIM. These are typically small- or mid-cap companies that are seeking aggressive growth and want to be listed on a public exchange. Thousands of companies have gone public, thanks to the more flexible listing requirements of AIM. But these companies are also required to work with a NOMAD that will guide it through this process and continue to be a resource once the company is admitted.
A NOMAD focuses on specific sectors in which they are an expert in, and they provide the company with continuous guidance on all the AIM rules. Assuming the company goes public via an IPO and gets listed on AIM, the NOMAD makes sure the company remains compliant with AIM standards, is up-to-date with AIM’s regulatory changes, and provides the company strategic advice depending on the market cycle.
Some NOMAD responsibilities include: providing financial planning advice, determining whether the company is eligible to be listed on AIM, preparing the company to be listed on the public exchange, and acting as the company regulator during its time on the AIM.
💡 Quick Tip: How do you decide if a certain trading platform or app is right for you? Ideally, the investment platform you choose offers the features that you need for your investment goals or strategy, e.g., an easy-to-use interface, data analysis, educational tools.
How Do Nominated Advisors Work?
The Alternative Investment Market (AIM) is a sub-market of the LSE. It is a network that’s designed to allow certain companies that may not be ready for a larger exchange to gain access to the markets and thus reach their full potential.
In order for a company to gain entry into this market, a NOMAD needs to facilitate the process.
The NOMAD does research to see if a company is viable to join this part of the stock market, which is a market for small to mid-sized growth companies. If the company fits the AIM listing requirements, the NOMAD will work with the company to apply to the exchange. If the company is admitted successfully, the NOMAD continues to oversee the company, much like a regulator, to make sure the company is adhering to all the AIM rules.
Recommended: How to Buy IPO Stock
Qualifications for NOMADs
The NOMAD has to be approved by the London Stock Exchange, and there are certain criteria the advisor must meet in order to hold the title of a NOMAD.
First, a NOMAD is not an individual person, rather it is a firm or company that a company uses to get on the LSE. And according to the AIM rules, the NOMAD has to have practiced in corporate finance for at least two years.
The NOMAD needs to also have experience in facilitating at least three qualified transactions.
Lastly, the NOMAD must employ at least four qualified executives on staff of the firm. To become a NOMAD, the firm needs to complete the Nominated Advisor application form.
Once the NOMAD is appointed for the company, typically a smaller company by market cap, the Nominated Advisor is then responsible for advising and guiding the company on how it can be successfully admitted into AIM. The Nominated Advisor must maintain its eligibility status even after it is approved by the LSE.
The Exchange can conduct interviews with the NOMAD to ensure it maintains understanding of AIM rules for companies seeking admission and maintaining their position in the exchange. This is important to mitigate the potential for risk for investors. IPOs are considered extremely volatile events, and can expose all investors — but particularly inexperienced individual investors — to heavy losses.
💡 Quick Tip: Keen to invest in an initial public offering, or IPO? Be sure to check with your brokerage about what’s required. Typically IPO stock is available only to eligible investors.
The NOMAD Process
The NOMAD is needed once a company decides it wants to be listed on the AIM. Next, the NOMAD is appointed to assist the company through the application, admissions processes and ongoing guidance while listed on the exchange. After the company is finally listed on the AIM, the NOMAD offers consistent oversight of the company to ensure its listing.
Once admitted to the exchange, if the company the NOMAD oversees does not continue to meet AIM requirements, the NOMAD may choose to resign from their position or report the company, otherwise, the NOMAD could be subject to a fine for not upholding AIM expectations. In such a scenario, the company’s shares would be suspended and eventually de-listed if a NOMAD replacement is not found within a 30-day period.
What Is the Importance of a NOMAD During the IPO Process?
The Alternative Investment Market was launched in 1995, and its success can be partly attributed to the role that NOMADs play. When a company applies to be admitted into AIM, the NOMAD facilitates the process and is integral to the company getting listed on the exchange. The company that wants to be listed in AIM must appoint a NOMAD, a trusted and experienced representative that ideally may lead the company to go public.
This critical process requires the NOMAD to make sure the company is following the AIM’s rules and regulations, which is why the LSE had strict criteria for becoming a NOMAD. The Exchange wants to ensure the company seeking admission to AIM meets the criteria and has the potential to be a long-term success, and to keep the integrity of the market and protect shareholders who may invest in companies listed on the exchange.
The Takeaway
For some smaller, perhaps riskier, companies hoping to gain access to market capital, a NOMAD or nominated advisor, is required to become listed on the Alternative Investment Market (AIM), a submarket of the London Stock Exchange (LSE).
This route may offer an easier path to an initial public offering. The AIM is considered less rigorous in its requirements, compared with some larger exchanges, and they will consider listing small companies seeking aggressive growth as long as those entities are paired with a NOMAD.
The NOMAD is typically a corporate finance advisor that thoroughly reviews the AIM applicant in terms of its business model, track record, executive team, financials, and so forth. Assuming the company satisfies all requirements, the NOMAD agrees to assist the company in its application to the AIM, and to continue to provide oversight afterward.
Whether you’re curious about exploring IPOs, or interested in traditional stocks and exchange-traded funds (ETFs), you can get started by opening an account on the SoFi Invest® brokerage platform. On SoFi Invest, eligible SoFi members have the opportunity to trade IPO shares, and there are no account minimums for those with an Active Investing account. As with any investment, it's wise to consider your overall portfolio goals in order to assess whether IPO investing is right for you, given the risks of volatility and loss.
FAQ
What is a NOMAD company?
A NOMAD company is a financial entity that has been approved by the London Stock Exchange (LSE) to help eligible companies who are interested in being admitted into Alternative Investment Market (AIM), which is part of the LSE.
What do NOMADs do during an IPO?
As corporate nominated advisors, NOMADs provide advice to a company that wants to go public on AIM. The NOMAD has market sector expertise and does their due diligence to make sure a company meets the eligibility requirements to be listed on the exchange.
What is a NOMAD investment?
NOMADs is integral in the pre-IPO process because they provide guidance for being admitted into the exchange along with ongoing oversight once the company has successfully been accepted into the public exchange.
Photo credit: iStock/ridvan_celik
SoFi Invest®
The information provided is not meant to provide investment or financial advice. Also, past performance is no guarantee of future results.
Investment decisions should be based on an individual’s specific financial needs, goals, and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC registered investment advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).
2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.
3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.
For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or prequalification for any loan product offered by SoFi Bank, N.A.
Investing in an Initial Public Offering (IPO) involves substantial risk, including the risk of loss. Further, there are a variety of risk factors to consider when investing in an IPO, including but not limited to, unproven management, significant debt, and lack of operating history. For a comprehensive discussion of these risks please refer to SoFi Securities’ IPO Risk Disclosure Statement. IPOs offered through SoFi Securities are not a recommendation and investors should carefully read the offering prospectus to determine whether an offering is consistent with their investment objectives, risk tolerance, and financial situation.
New offerings generally have high demand and there are a limited number of shares available for distribution to participants. Many customers may not be allocated shares and share allocations may be significantly smaller than the shares requested in the customer’s initial offer (Indication of Interest). For SoFi’s allocation procedures please refer to IPO Allocation Procedures.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
SOIN0623081
