Expert View: Don't worry about Uncle Sam, he'll go easy on the LSE

AIM has succeeded where others have notably failed
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The Independent Online

Since Nasdaq showed an interest in buying the London Stock Exchange, we have heard over and over about Uncle Sam stamping his authority on little old UK plc.

But just what are we agonising about? Globalization (if you are American) or globalisation (if you speak proper English) has seen the likes of Jaguar, Aston Martin, Rolls-Royce, Bentley, Thames Water, London Electricity and BAA fall into foreign hands. They all "belong" - or are about to belong - to overseas enterprise and investors, but how have we been affected?

What really happens is that a great song and dance is made about these "crown jewels" when the news first breaks and then we all quietly forget. It's yesterday's headline. And if we're still shareholders, the brand builds and the company becomes more successful, we're quietly rather pleased with ourselves for not having kicked up too much of a brouhaha.

There is clearly something about the LSE which sets it apart from other takeover stories. Could it be that the LSE holds the key to something that has never, really, worked anywhere other than in the UK? I'm referring to its market for growth companies - AIM.

In 2004 AIM raised more money in new issues than the Official List, despite being a 20th of its size. A quarter of all AIM companies operate from overseas. AIM has succeeded where others have notably failed. The Neuer Markt stumbled, the Nouveau Marché tripped, Nasdaq itself - the market set up to attract emerging businesses in the technology sector - has outgrown its roots. If you're an "emerging" company and you're not worth upwards of $1bn, you may as well forget Nasdaq.

Ofex has been revamped, rebranded and revisited as PlusMarkets but still has a long way to go. Alternext, Euronext's "AIM", is tumbling slowly forwards. But how many companies are there on Alternext these days? A grand total of 63. AIM has nearly 1,600. Based out of Paris, Alternext has never really proven itself attractive to companies based other than in France. The French interior minister, Nicolas Sarkozy, summed it up when he exhorted French companies to adopt English as the business language of choice.

Nothing better demonstrates how a market left to self-regulate can prosper than AIM. Its growth has been nothing short of startling in the past two years. Part of the rise is due to the rocketing value in natural resources companies.

At the risk of upsetting AIM's unique formula for light regulation, LSE's AIM team has brought in new rules to uphold the quality of resource companies. They also turned their attention to cash shells and suspended those that failed to meet appropriate criteria. But the spirit of light-touch regulation continues.

Others, notably Sir Derek Higgs, have called for the imposition of further regulation on AIM and have championed the notion that AIM companies should adhere to a simplified Combined Code on Corporate Governance.

I believe that would have achieved nothing more than codify best practice on AIM. Those that need to comply, do, those that don't, don't. If investors aren't happy, they'll take their money elsewhere.

In contrast, Hank Paulson, US Treasury Secretary, is lobbying to make US capital markets more competitive in the global marketplace by reducing regulation. He has been pushed to ask this week whether US corporate governance struck the right balance between protecting investors and imposing undue restraint and cost on business. It is highly unlikely to mean revocation of Sarbanes-Oxley legislation but may well have the effect of lightening the regulatory burden there.

So, if they say they aren't going to meddle with our regulatory regime, and we say they shouldn't, we seem to agree. We have nothing to fear from Uncle Sam. Except his spelling.

John Cowie is head of AIM at Smith & Williamson

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