Thanks for the (catty?) reply Pinkie (not affended) and the others (airdale1 and Cause) for an informative reply. I appreciate your help.
The mechanics of investing in a company quoted on AIM are very similar to investing in a company listed on the Exchange’s Main Market. As with the Main Market, you will need to use a stockbroker to carry out the transaction on your behalf.
Getting a stockbroker
If you do not already have a stockbroker you can look on the London Stock Exchange website for a directory of member firms. You can search the directory using different criteria: the name of the firm, the type of service they offer, or the region of the UK in which the firm is based.
Some firms offer an online-only service, in which case you can contact them by email. As when you open a bank account, the stockbroking firm first has to check your identity, so it will need to make various enquiries before accepting you as a client. This is a matter of routine. Because your stockbroker will be investing money on your behalf, it is required by law to verify your identity and creditworthiness prior to dealing.
Investing in an AIM company
Most AIM companies raise money and issue shares by way of a 'placing' when they float on AIM. This means that the company approaches a small selection of financial institutions which agree to invest money in the company in return for shares. These shares are said to be 'placed' with the institutions. It is rare for a private investor to have the opportunity to make an investment in an AIM company at this initial stage. It is more likely that private investors will be able to invest in the company by buying shares once the company has floated and the shares are being freely traded.
Occasionally a private client stockbroker may take up part of the initial 'placing' when a company floats, in which case it may in turn offer portions of this initial investment to its clients.
How are AIM shares traded?
Most AIM shares are traded on a London Stock Exchange trading service. Members of the Exchange called 'market makers' quote competing prices for buying and selling the shares throughout the trading day (08.00 - 16.30). Your stockbroker will approach one of these market makers on your behalf and ensure that you are able to buy at the best price available at the time of the trade.
Share prices with a 15-minute delay are available free of charge on the London Stock Exchange website under the 'Prices & News' section. Click here to see this service.
Every trade transacted by our member firms is reported to the Exchange within 3 minutes of its execution. This information is published to the market so that the execution price of each trade is made publicly available..
Your stockbroker will charge commission for carrying out each transaction for you. The rate of commission charged varies from firm to firm. The standard time for 'settlement' of the transaction − meaning when the funds for buying shares are payable or when the proceeds from a sale are payable to you − is three working days after the execution of the trade between the stockbroker and the market maker. Stamp duty is payable on shares in a UK company. The current rate is 0.5% of the monetary value of the shares you purchase.
Do I get a share certificate
Increasingly, share trading takes place in 'dematerialised' form. This means that a physical share certificate is not produced, although your stockbroker will provide you with a record of your shareholding in a format similar to a bank statement.
It may be that your stockbroker offers a 'nominee' service, under which the shares are dematerialised and held on your behalf in a nominee account. Alternatively, it is possible to gain sponsored membership of CREST, the UK share settlement organisation, and hold your shares in your own name. So it is still possible to obtain share certificates if you wish, depending on the services you stockbroker offers to clients. Your stockbroker can advise you on the most suitable option
