Carry On Campos
Mar. 9th, 2007 01:13 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
peterbirksWell, if you are going to give Roel Campos, one of five commisioners at the US Securities & Exchange Commission, any kind of credit, it's that he kind of knew that it was time to stop digging.
First, some background. The US, and the New York Stock Exchange in particular, is somewhat irritated that the insane regulatory rules imposed by the Sarbanes-Oxley laws have not been followed slavishly by the rest of the world. In particular, they haven't been followed by the London Stock Exchange. And, more in particular, they very much haven't been followed by the Alternative Investment Market (AIM).
So, at the SEC Conference on regulation outside the US, Campos was only saying on the sidelines what quite a few regulators probably say every day in private.
"I'm concerned that 30 percent of issuers that list on AIM are gone in a year," Campos said. "That feels like a casino to me, and I believe that investors will treat it as such."
Now, Campos is not alone in being concerned at the lightness of the "light touch" when it comes to regulation on AIM. Personally I think that any investor in AIM stocks should have to go through a severe "caveat emptor" warning page.
About 60 US companies decided to list on AIM, rather than go through the tortuous procedures in the US. New York is distinctly unhappy about the amount of business (and money) that is coming to London rather than New York. Bonuses are now at a level where no longer do people working in investment banking over here want to get "over there", "because that's where the big money is".
However, saying something to stock exchanges in private and saying it in public are two different things. particularly if you get your facts wrong. As the London Stock Exchange pointed out within hours, the failure rate on AIM is about 3%, not 30%.
Needless to say, journalists were not slow to pounce on Campos's remarks. And when he was asked if he felt that London's AIM was like a casino, Campos said "Absolutely not".
Backtracking faster than a champion backwards runner, Campos added that "what I was referring to was a generalised situation".
Well, read the quote for yourself. Doesn't sound particularly generalised, does it? And it's hard to see what context the quote could be taken out of that would make the meaning any different.
But there are other forces that might be at work here. Don't forget that Neteller was AIM listed. SportingBet was, I think, AIM listed. PartyGaming was a FTSE 250 company. There's 888 as well. It wasn't just Sarbanes Oxley that was sending these companies (and all the concomitant fees) to list in London. It was a realization that listing in the US brought up considerably more problems than listing in the UK in legal, compliance and moral terms. Basically, the UK is a lot more laissez-faire.
The main question Campos should be raising is, is this a good thing? But it's a hard line for the US to take, that more regulation is good. In a sense, the UK tends to trust the investor to have some kind of head on his (or her) shoulders, and to take responsibility for his actions. The excuse "but they lied to me!" doesn't cut much ice. The response is "it's business, what did you expect?" In the US, the response is a lawsuit.
And the weird thing about it all is that I doubt that Sarbanes-Oxley will have the required impact. It will make life a lot worse for honest companies, but it won't make it impossible for the crooks. And, when it comes to gigantic fraud, it should be remembered that Enron was not, so far as I recall, listed on the London stock exchange.
First, some background. The US, and the New York Stock Exchange in particular, is somewhat irritated that the insane regulatory rules imposed by the Sarbanes-Oxley laws have not been followed slavishly by the rest of the world. In particular, they haven't been followed by the London Stock Exchange. And, more in particular, they very much haven't been followed by the Alternative Investment Market (AIM).
So, at the SEC Conference on regulation outside the US, Campos was only saying on the sidelines what quite a few regulators probably say every day in private.
"I'm concerned that 30 percent of issuers that list on AIM are gone in a year," Campos said. "That feels like a casino to me, and I believe that investors will treat it as such."
Now, Campos is not alone in being concerned at the lightness of the "light touch" when it comes to regulation on AIM. Personally I think that any investor in AIM stocks should have to go through a severe "caveat emptor" warning page.
About 60 US companies decided to list on AIM, rather than go through the tortuous procedures in the US. New York is distinctly unhappy about the amount of business (and money) that is coming to London rather than New York. Bonuses are now at a level where no longer do people working in investment banking over here want to get "over there", "because that's where the big money is".
However, saying something to stock exchanges in private and saying it in public are two different things. particularly if you get your facts wrong. As the London Stock Exchange pointed out within hours, the failure rate on AIM is about 3%, not 30%.
Needless to say, journalists were not slow to pounce on Campos's remarks. And when he was asked if he felt that London's AIM was like a casino, Campos said "Absolutely not".
Backtracking faster than a champion backwards runner, Campos added that "what I was referring to was a generalised situation".
Well, read the quote for yourself. Doesn't sound particularly generalised, does it? And it's hard to see what context the quote could be taken out of that would make the meaning any different.
But there are other forces that might be at work here. Don't forget that Neteller was AIM listed. SportingBet was, I think, AIM listed. PartyGaming was a FTSE 250 company. There's 888 as well. It wasn't just Sarbanes Oxley that was sending these companies (and all the concomitant fees) to list in London. It was a realization that listing in the US brought up considerably more problems than listing in the UK in legal, compliance and moral terms. Basically, the UK is a lot more laissez-faire.
The main question Campos should be raising is, is this a good thing? But it's a hard line for the US to take, that more regulation is good. In a sense, the UK tends to trust the investor to have some kind of head on his (or her) shoulders, and to take responsibility for his actions. The excuse "but they lied to me!" doesn't cut much ice. The response is "it's business, what did you expect?" In the US, the response is a lawsuit.
And the weird thing about it all is that I doubt that Sarbanes-Oxley will have the required impact. It will make life a lot worse for honest companies, but it won't make it impossible for the crooks. And, when it comes to gigantic fraud, it should be remembered that Enron was not, so far as I recall, listed on the London stock exchange.
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New Zealand
Date: 2007-03-10 09:32 am (UTC)I went via Singapore which I didn't rate although many of those on the tour raved about it.
The real eye-opener was that it only took 36 hours from leaving the final hotel in New Zealand to arriving back in Daventry. Wow!
Martin Nicholson
Daventry UK
no subject
Date: 2007-03-11 10:21 pm (UTC)Marred only a smidgeon by the fact that SOX was largely, if not entirely, a response to the collapse of Enron. I suspect that an equivalent response to the collapse of Enron, had it been listed on AIM (the original point of your posting) or the LSE (and as you correctly recall, it was not), would have been
Hee hee hee.
This is basically my own response to shareholders being shafted in any market whatsoever. (Oh dear, and I'm working for a stock exchange. How very morally questionable.) I'd go so far as to say that anyone who relies on a pension fund to pay for their putative retirement is basically taking as wild a punt as there is in the wonderful world of bonds and shares, but then, what would I know? I'm stone broke and have no money whatsoever put aside for the old age that I'm unlikely to have.
However, somebody should enlighten Senor Campos de natura casinium. A 30% failure over any substantial period does not a casino economy make. A 100% failure does. Besides which, the whole dot-com phenomenon was predicated (ludicrously) on the assumption that 80% - 90% of the startups would fail, and the remainder would multiply faster than Moses could ever dream of...
... but don't let's go into that. I was There. I Suffered.
Why even bother giving these people head-room? They're politicians. Modern politics isn't about principles (if indeed it ever has been), or even giving lip-service to principles. It's about sound-bites. It doesn't matter how moronic the sound bite is: it will be picked up by CNBC, the New York Times, and the Melanesian Stoat-Stranglers' Gazette; chewed over; spat out; faced with a "balancing" op-ed on the other side of the page, and generally neutered.
This is merely evidence of somebody doing his job. Pointlessly. It's a pointless job, and it just gets in the way of reality.
It's tough, and embarrassing, and intellectually dishonest. But somebody has to do it.
no subject
Date: 2007-03-11 10:48 pm (UTC)The thing about regulation is that, if a company is determined to lie to the auditors and to the regulators, there just isn't that much you can do about it. Use GAAP, Solvency 2, IFRS, or anything you fucking want; if the company is giving you duff figures in the first place, even the most stringent regulatory regime won't work.
Meanwhile, all the honest companies are up to their necks in paperwork and unable to get on with being a good business.
Si?
PJ
One final sentence, one last time
Date: 2007-03-11 11:11 pm (UTC)It would be interesting to know whether or not Enron could have flourished in a different regulatory/political environment. The general consensus is that the whole kaboodle was only possible in the first place because of a (fairly questionable) relaxation of the energy supply regulations at the time. (Can you say Wendy Gramm?)
I do have a certain beef with Enron. Not with the fact that they fucked around with other people's money -- that's other people's money, as I say. But God knows, living in California with the ramshackle energy infrastructure they have in place is difficult enough at the best of times: it doesn't help, having a bunch of politically-connected sharks futzing the supply and demand curve such that the entire bloody state runs out of power for days at a time. I don't think that it takes "lying to the auditors and the regulators" to make this obvious.
As if? They lied to the Anderson auditors or the Republican-picked and -neutered regulators, I suppose? No, it seems to me that there is a certain amount of complicity here.
There is a world outside of the stock market, and it is usually bleeding obvious that it is being crapped on from a great height by the likes of Enron (or Slater-Walker, to take an ancient British example). How much regulation, exactly, do you feel might be appropriate for the well-being of your fellow man?
That said, the paperwork is obnoxious and probably soul-destroying. Sarbanes-Oxley may well be a bad law. That does not invalidate the proposition that some form of regulation was necessary in the first place. Your argument, taken to its logical conclusion, seems to me to imply that the LSE and AIM should be free of all regulatory requirements (other than simple Common Law requirements to settle debts, etc) in their entirety.
Or perhaps I'm reading you wrong.
And I hate to be too anarchistic or left-wing or anything, but, "honest companies?"