AIM as an alternative model of securities regulation

One of the points made against SOX is that it has been driving listings away from US markets and to other markets, notably including London's Alternative Investment Market. The counter-argument on behalf of SOX has been that we're not missing much – these are riskier and junkier stocks that couldn't pass muster in the US. I have responded that accommodating risk is supposed to be what our markets are about.

But there's another response, which is that AIM offers an alternative approach to regulating securities that we ought to be looking at. Mendoza, Securities Regulation in Low-Tier Listing Venues: The Rise of the Alternative Investment Market, offers an interesting and sympathetic look at this alternative model. Here's an excerpt from the abstract:

Despite AIM's astounding results in recent years, the causes underlying its growth have not been the object of extensive academic analysis. This paper will focus on the recent outbreak of low-cost listing venues in international financial centers and AIM's dominance in this particular niche. It will be contended here that AIM covered a funding gap for companies whose specific characteristics preclude them from listing in senior markets such as NASDAQ, the New York Exchange or the London Stock Exchange. This paper also endeavors to show that AIM's regulatory model is optimal - imposing low compliance costs on firms, but ensuring adequate disclosure and transparency levels - given the type of companies that seek an AIM listing and the sophisticated nature of its investors.