Naviblog says: Come on John, you can't eat your cake and have it as well

* John Thain, CEO of the New York Stock Exchange, has publicly deplored the fact that the London Stock Exchange's reputation will soon be in tatters. Altruistic concern from a fellow finance professional? Not quite. The fact of the matter is that London's small cap market, the AIM, is very attractive indeed as compared to the NYSE or the Nasdaq.

Everyone knows that the knee-jerk reaction to the Enron debacle in the States was the Sarbanes-Oxley laws that are supposed to add transparency, but in an increasingly liquid international capital market, this is one more constraint for those startups at the so-called bottom of the finance pyramid. Rules at AIM are too lax? I say SarBox is only effective for the largest companies that can afford it, for everyone else they're a dead weight that brings nothing to the table except extraordinary losses, operational overhead and generalized grief across the organization. Is there really increased transparency since these were enacted? A slew of SarBox consulting practices later, nothing has changed.

John, you cannot expect a globalized capital market to wait around for SarBox to work its wonders, and typically, neither do the companies who want to list. Thanks to SarBox mania, Japan will soon have its own Sarbox in about a year or two, so with the small caps back down in the doldrums whether you're talking about the Jasdaq or Tokyo SE's small cap "Mothers" exchange, there's a pretty good chance that already scarce fund raising channels will be squeezed even further. Increasing transparency and tightening the noose are not the same ballpark, one has to do with business morals and accounting practices, the other with cash in the till at the end of the day.

I'm personally involved in Dreamgate, a Japanese government-backed NGO that promotes entrepreneurship in Japan. Everyone dreams of the day their company goes public (without knowing the hardships that come with it), another feather in their funding cap and increased social prestige. What am I supposed to say to starry-eyed entrepreneurs-to-be if SarBox bans a significant fraction of those from a great way of getting funding, while trillions of dollars slosh around the global markets looking for juicy yields and ROI? This is nothing short of obscene. There are only a few ways to raise money in this world, and you're not making it easy for the rest of us. Leave off on London, get your own house in order and who knows? Maybe you wouldn't need SarBox to enforce investor confidence.

Maybe you just need a code of conduct backed by current accounting procedures. If they are flouted, the company is barred from capital markets for 10 years. Plain and simple. Excessive? I doubt many companies would fudge it if they're serious. And it would open up the floor to the small fry like us, so that we too can get a piece of the funding action.