It seems there's been a bit of a problem. AIM listed stocks are not eligible for a PEP/ISA unless they are listed on an officially recognised exchange (or which there is a definitive HMRC list - http://www.hmrc.gov.uk/fid/rse.htm ). Note the use of 'listed'
It seems many stocks are traded on the Berlin Exchange's Third Segment market from all over the world. However, these are traded, not necessarily listed (it would seem listing is a lengthy and expensive process for the company concerned).
There was an article in the Chronic Investor ( http://www.investorschronicle.co.uk/ ) in June highlighting this anomaly (albeit in relation to an article on IHT, but highlighting the issue). In fact, the Investors Chronicle had to revise its facts because it too got muddled.
The IC article is at: http://www.investorschronicle.co.uk/content/paid/2006/Tools/tools_20060623_1.html if you have a subscription.
It seems the PEP & ISA Managers Association (PIMA http://www.pima.co.uk ) have recently issued guidance (dated 7 July 2006) that has caused some PEP/ISA managers to review their position on affected AIM stocks, on the basis that AIM stocks that were previously thought eligible because they were listed on the Berlin stock exchange are no longer eligible because they were only traded on the Berlin stock exchange (Third Segment), not listed on the ‘Amtlicher Handel’
I have received a letter from my PEP manager giving me 14 days to make arrangements to move what is now viewed as a non-qualifying AIM stock from my PEP (several options for removal).
As it happens, now is not a good time to sell the stock in question as it will sell at a significant loss.
In my view, the PEP manager should be shouldering some of the responsibility for this situation as they didn't check the eligibility of the stock before allowing me to buy it in my PEP. I have previously tried to put other unusual (mostly foreign) stocks in my PEP which weren't on the manager's standard selection of available PEP stocks and they have checked and generally refused.
I am also underwhelmed by the manager's 14-day time limit. This situation has been going on for some time and the PIMA guidance was issued 7 July. There is nothing in the PEP regulations about a time limit for this situation (there's is a 30-day time limit for getting delisted stocks out of a PEP, but that's slightly different). If I were to get a longer timescale to get out of the now ineligible stock at a better price, I might be more amenable.
Interestingly, HMRC's April 2006 PEP/ISA bulletin reiterated the situation regarding qualifying AIM stocks, and can be found at: http://www.hmrc.gov.uk//isa/bullletin30.htm so unless PIMA read the IC article in June and got cold feet, it's taken some time after HMRC's April bulletin for it to act.