OUR STOCK EXCHANGE'S struggling Trivial Pursuits Board (GEM) is still trying valiantly to strike an elusive balance between proper regulation of securities and inducements to companies to list their securities.
It has just published another list of amendments to its rules. They are mostly of a housekeeping nature, a twist here to tighten a restriction and a tweak there to loosen one. We will not bother to go into the relative merits of these changes. It comes down to lawyers' talk and I value having readers. Ever tried to read a legal brief?
But there are two points worth noting. The first is that the GEM is based on lax listing rules which have become even laxer through the granting of waivers, one reason that this secondary market has been such a disappointment to investors. Small changes change little. The GEM's most obvious characteristic is still that it makes life easy for sharks in suits.
The second point is one that our regulatory authorities have not really yet considered but should do.
Why should the burden of regulation be carried by government authorities when there are mechanisms we could adopt to make the private interests concerned do it themselves and more effectively too?
One of the arguments the stock exchange and the Securities and Futures Commission advance for allowing the GEM to operate on lax rules is that the comparable Nasdaq market in the United States has even laxer rules.
It is both true and not true. Yes, the stated rules that apply to the Nasdaq alone are laxer than the stated rules that apply to the GEM alone, but overall securities law in the US is tighter, the penalties are more severe and the enforcement of the rules relies much more on private lawsuits by shareholders.