The proposal by the Federal Minister for Industry, John Moore, for a “”second board”” on the Australian Stock Exchange has merit. Many small and medium companies find it far too expensive to meet the stringent demands of the Australian Securities Commission to list on the present exchange and so are denied the chance to raise money from the public.
Mr Moore argues that there is a market for high-risk money. People seeking high returns in speculative investment … often in hi-tech areas … should have that avenue.
But there is a snag. Too often unscrupulous people are all too willing to take money from mugs. This is why the disclosure rules were originally put in place. However, a lot of those rules have gone too far. Moreover, the very detailed prospectuses that arise from them are often not read, let alone understood by many public investors. Mr Moore’s plan has the advantage that a second board of itself would be a prominent “”buyer beware” message.
The essential problem, though, may not be in the Stock Exchange or Securities Commission rules. A decade after the bursting of the speculative bubble of the 1980s, prosecuting authorities and the courts are still dealing with the wash-up because of tardy court processes. The quick apprehension, conviction and punishment of corporate criminals would do far more to instil confidence among investors than any amount of rules on the provision of information to public investors. Investors in a second-board market will accept losing their money upon business failure through misjudgment of the market, but they still want to be protected from outright dishonesty.