Initiative to police Ofex

OFEX, the unregulated share market, has sent out a consultation document for a code of best practice. The move follows criticism of how it has been run. ProShare, the private shareholders lobbying group, has urged that Ofex be more formally regulated.

The guide has been drawn up by JP Jenkins, the stockbroking firm that manages Ofex. The market was designed as an alternative for the old Rule 4.2 companies, whose shares were traded on a matched bargain basis. Rule 4.2 was phased out by the Stock Exchange after the Alternative Investment Market (AIM) was set up two years ago. While some Rule 4.2 companies joined AIM, others preferred Ofex, which does not require the company to foot the cost of appointing a nominated adviser.

JP Jenkins wants comments in writing by 21 August, with the aim of implementing the code by late summer. John Jenkins, the chairman, said: "The consultation is a major undertaking, covering not only companies and their advisers, but also the firms with whom we trade as well as the City authorities."

David Webb, recruited from the Stock Exchange listings department, is heading up the consultation process.

Since its formation in 1995, Ofex has grown to 170 companies. Among the businesses traded on it are Weetabix, the breakfast cereals company, and National Car Parks, as well as football clubs Arsenal, Manchester City and Rangers.

Because of its looser regulatory framework, start-ups have found it an easier route to raising venture capital-style money. However, a number of more colourful businesses have also joined the market. Skynet, where controversial share dealer Tom Wilmot has had a stake, saw its price rise from 27.5p to 275p before coming back to 15.5p. The company, which specialises in car vehicle security systems, is subject to an investigation by the Securities and Futures Association into some of the dealings in its shares.

More recently, Display.IT, an internet business, raised funds on Ofex to develop its browser, which allowed users to take a feed of financial information from Reuters off the internet, by-passing the need to rent a dedicated Reuters terminal.

The shares have crashed to 145p, having dropped by over a third in a few weeks. The company had said it would receive pounds 11.5m from Alsina, a Luxembourg-based company it claimed was connected to US billionaire Ross Perot, for sales of its browser. It transpired there is no connection with Mr Perot, however, and few details are available about Alsina. Copyright: IOS & Bloomberg