The US Securities and Exchange Commission (SEC) launched an astonishing attack on the City’s regulatory standards yesterday, just weeks after an American bidder failed in its quest to buy the London Stock Exchange.

Roel Campos, an SEC commissioner, likened London’s junior AIM market to a casino, challenging frequent assurances by Nasdaq that LSE regulations would be “ringfenced” in the event of a takeover by the New York exchange.

“I’m concerned that 30 per cent of issuers that list on AIM are gone in a year. That feels like a casino to me,” Mr Campos said on the sidelines of the SEC Regulation Outside the US conference in London. “It is a losing proposition to tout lower standards as a way to promote your markets.”

As the competition to be the world’s leading financial centre hots up between London and New York, Mr Campos upped the ante by suggesting that the LSE would also suffer as a result of the lax regulation of AIM. “There’s also a danger with higher standards; if it’s too affiliated with an exchange that has lower standards, it gets painted with the same brush.”

Mr Campos later sought to play down his comments, saying that he did not intend to “smear” the London exchange. However, his sentiments will tap into fears among LSE customers that tough regulations would be forced on the London exchanges in the event of a takeover by Nasdaq, which declined to comment on the SEC commissioner’s views.

The City of London, the local authority for the Square Mile, immediately leapt to the defence of AIM. Michael Snyder, chairman of the City’s policy and resources committee, said Mr Campos’s claims were “founded on false assumptions”. He said: “AIM is a well-regulated market and those advisers who introduce companies to it put their own reputation on the line. Investors know that there is scope for loss as well as profit.”

The LSE said Mr Campos’s remarks were “entirely wrong”. “They do a disservice to the quality small companies choosing to join AIM, the institutions choosing to invest in those companies and the high regulatory standards that the LSE promotes.”

Mr Campos’s remarks are in contrast to comments made by Bob Greifeld, Nasdaq’s chief executive, last autumn. He said that he supported efforts in the US to relax the notoriously heavy burden of the Sarbanes-Oxley regulations in favour of “a more risk-based approach” closer to that in the UK.

The heavy burden of regulation in New York introduced after the Enron accounting scandal is thought to have diverted many of the largest initial public offerings to London. Last year’s combined proceeds from IPOs on AIM and the LSE topped those on Nasdaq and the NYSE for the first time.

John Thain, chief executive of the NYSE, said recently he felt the junior market “did not have any standards at all and anyone could list”.

Roel concern

‘I’m concerned that 30 per cent of issuers that list on AIM are gone in a year. That feels like a casino to me, and I believe that investors will treat it as such’

‘Issuers who can’t even meet the standards of our over-the-counter, or pink sheet, situations. They’re hoping that they’ll get lucky and investors will look at this lower-standard exchange’

‘It’s a losing proposition to tout lower standards as a way to promote your markets’

‘US markets are not in decline, whatever people may have heard’

Roel Campos

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