Bizarro AIMo 3 – The AIM Casino

If you read this blog regularly, you might that those are my words. But they’re not. One of our readers came across this telling news story. The “casino” word came out of the mouth of one of the U.S. SEC’s five commissioners.

This from the Financial Times:

A top policymaker at the US SEC on Thursday night sought to defuse an outcry in the UK over comments in which he was reported as having described the London Stock Exchange’s junior Aim market as “a casino”. Roel Campos, one of five commissioners at the US market regulator, sparked a furious response from the LSE after a Dow Jones newswire report in which he said that 30 per cent of companies listing on Aim were “gone in a year”. “That feels like a casino to me, and I believe that investors will treat it as such,” he was reported as saying. The LSE hit back angrily, declaring Mr Campos’s reported failure rate an exaggeration by a factor of about 10 and hinted that jealousy over Aim’s success in attracting US listings lay behind his comments.

The SEC commissioner later backtracked, saying that his remarks last Wednesday to the Dow Jones newswire were taken out of context:

What I was referring to was a generalised situation in which if [regulatory] standards are ignored and you have a spiral downward you could get into a situation where an exchange could be nothing more than a casino.

Whatever. You have to believe he had it right the first time, as his come-down is no more than a rephrasing of his original point. Without regulation, stock markets can only become a casino.

Why then, are so many Canadian investment banks rushing to establish platforms over there?

In Canada, the investment bankers can’t have lunch with a research analyst colleague in the absence of a compliance officer, and if the analyst has lunch with a Canadian CEO in the weeks before he/she takes a company public on the TSX, then that analyst isn’t allowed to cover the company, post-IPO.

But on the AIM desk, the UK-based research analyst for a Canadian investment bank issues a research report before the IPO roadshow, to help sell the IPO (the “pre-float note”). Got that?

Remember when the “Friends of Frank” got lucrative technology IPO allocations, allegedly in exchange for giving CS First Boston i-banking business? That was less that a decade ago. Today, spinning (as it is called) a Silicon Valley deal would probably land you in a U.S. jail.

How can any North Amercian investment bank operate one division under the rules of today, and another division on what seem to be the rules of the late 90s?

Must be awfully complicated for their compliance lawyers to remember which meetings they are to attend, and which they are to ignore.

MRM