This highlights the potential for an unwise

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self-interest, Wall Street is joining in. This highlights the potential for an unwise regulatory “race to the bottom.” Pan notes: To the extent direct purchases abroad become more common and institutional investor purchases continue to grow, a greater share of the US investor base will be buying shares of companies that do not meet any of the US securities law requirements. Information will be disclosed in a [sic] unfamiliar manner, financial information may be prepared in accordance with weak accounting standards, and fraud and liability protections may be absent. The SEC therefore faces its own competitive pressure—over-regulate and investors and issuers will move offshore; under-regulate and investors and markets may be harmed. 338 SOX’s only clear impact in the listings arena has been to nudge many very small firms away from NASDAQ and to the AIM Market in London. But the SEC should generally resist pressure for deregulation to lure these firms to New York, because AIM’s standards have been so low that “[y]our child’s lemonade stand would probably have a shot at being listed.” 339 AIM has been criticized for being less than diligent in policing fraud among its listing companies. 340 There has been an 334 This is certainly not a universal rule. No exchange in the U.S. seems unduly tempted at the current time to lower its listing standards to compete with London’s AIM. Indeed, NASDAQ went the other direction by raising its standards on the new NASDAQ Global Market 335 Bernard S. Black, Is Corporate Law Trivial?: A Political and Economic Analysis , 84 N W . U. L. R EV . 542, 558 (1990); see also Karen Richardson, How NYSE, Nasdaq Listings Confer Value , W ALL S T . J., Jan. 8, 2007, at C3 (providing recent evidence that to preserve listings exchanges often do not enforce their standards). 336 Robert A. Prentice, Regulatory Competition in Securities Law: A Dream (That Should Be) Deferred , 66 O HIO S T . L.J. 1155, 1198-1200 (2005) (giving many specific examples). 337 Coffee, Impact , supra note 306, at 19. 338 Pan, supra note 200, at 14. 339 Anderson, supra note 223, at C6 (“[S]maller companies are listing in London because there is a market there [the AIM] that boasts of having virtually no regulation, a benchmark the United States should not lower itself to meet.”). 340 See Richard Fletcher, Torex Profit Warning Sparks Inquiry , D AILY T EL . (London), Jan. 27,
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PRENTICE.FINAL.VERSION 11/29/2007 10:17:38 AM 2007] SARBANES-OXLEY: THE EVIDENCE 757 accelerating number of delistings on AIM and most of its stocks are not liquid at all; the average daily trading volume per company on AIM is only 2% of NASDAQ. 341 Already important investors are complaining of the adverse impact that some overseas listings are having on the standards and reputation of London as a financial center. 342 Problems at AIM have forced the LSE to change its rules to increase regulation; soon firms that list on AIM “will face inspections from the London Stock Exchange, and in a move with echoes of Sarbanes-Oxley, they will have to attest in writing that the company is ‘suitable’ to be listed on AIM.” 343 Increased disclosure is also on the horizon.
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Christopher Reinemann
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