They do it right on stock listings too, and we could learn a lot from them. The London Stock Exchange has plenty of governance regulations for its main venue. Some of these rules are of dubious value.
But British regulators allow investors and entrepreneurs to be the ultimate judge of these rules, by allowing the existence of an alternative venue, the Alternative Investment Market (AIM). The existence of this lightly regulated venue has rankled those across the Atlantic aghast at the notion of allowing investors to choose to buy into a company covered by anything less than the burdensome mandates of Sarbanes-Oxley.
Roel Campos, a Democratic commissioner of the Securities and Exchange Commission recently caused a stir when he referred to AIM as a “casino.” The Brits countered, quite rightly, that Campos may just be angry because, according to National Public Radio’s Marketplace, 60 U.S. based-firms are now listing in the AIM without having dual listings in the U.S. This in even more proof of Sarbox’s burden than the much-covered foreign IPOs that have passed up the U.S. in favor of the LSE.
But even if the AIM could be characterized as a “casino,” is there anything really wrong with that? After all, it is perfectly legal for Americans to blow their money at every new gaming venue popping up (as well as state-sponsored lotteries). Why not allow them to take their chances in a stock market venue where, like the AIM, the high risk is clearly advertised? At least then their “gambling” could help build up innovative new companies in sectors like technology.
As I pointed out yesterday in Investor’s Business Daily, ordinary U.S. investors are some of the biggest losers from Sarbox. If Sarbox isn’t reformed, they will very likely lose out on getting rich with the growth stages of the next Home Depot, which will get funding, if at all, through private equity funds available to only the super-wealthy.
But at least, with globalization, competition from the U.K. may either force overhaul of Sarbox here, or give Americans the opportunity to buy some high-growth stocks listed in London.