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The Treasury is bent to implement its decision not to include companies listed in the Alternative Investment Market (AIM) in the Individual Savings Accounts funding which are tax-efficient. The London Stock Exchange and the Quoted Companies Alliance had been vigorously campaigning against it but to no avail. According to Liberal Democrat Lord Lee, the Treasury’s decision is absurd with regards to not extending the Individual Savings Accounts (ISA) eligibility from the London primary market to AIM firms because the decision is a deterrent to investors who want to invest in AIM companies.
The move won’t help the London Stock Exchange, the small and growing entities, as well as the Quoted Companies Alliance. Those who are in favor of using ISAs to fund AIM companies believe that investors will be enticed to invest and that the funds will eventually boost the market’s liquidity which will minimize risks and volatility in investing in AIM firms.
The accountants BDO LLP and QCA released the result of a survey wherein about 37% of advisers and 34% of companies have favored the ISA changes. According to QCA chief executive Tim Ward, the United Kingdom is behind other nations when it comes to distributing incentives in order to encourage growth in the small and medium sized companies. If there is no reduction on red tape and equity market regulation, equity headquarters and markets will move towards other welcoming countries.
As it is, 43% of the respondents expect to employ more people in 2013. Also, 59% of the small and medium sized companies listed in AIM believe that they have more attainable future in other nations than in the United Kingdom. According to Ward, there must be intelligent policy decisions in order to quick start the economy and that the small and medium sized businesses play an important role in the growth of the economy.
On the other hand, in her Small Talk column at the Financial Times, Kate Burgess believes in the stand of the Treasury chancellor. In a recent survey of investors, they believe that money from the Individual Savings Account will just be invested to the most established and biggest firms listed in AIM. According to tax experts, ISA money being invested to AIM firms will just divert funding from small companies unlisted in AIM. Burgess believes that ISA was created to entice ordinary British individual to save money when he needs it. The ISA was not devised to profit hobby and well-informed investors.
Burgess pointed out that although not all companies listed at AIM pose a risk, these companies, however, are subjected to light scrutiny and regulation. These firms don’t need to have multiple years of trading histories before they can join the stock market. The primary UK regulator can’t even vet these companies’ prospectuses. Also, research had shown that if investors had invested their money to primary markets in 25 years, they can even earn six times more than what they would have earned by investing on AIM companies.
