Conventional wisdom holds that the London Stock Exchange is winning the international battle for listings and offerings, in large measure because of the “regulation-lite” policies of the UK’s Financial Services Agency. The reality is, however, more complex. A significant enforcement gap exists between the US and the UK, and its impact creates a regulatory dilemma for both countries.

London’s Alternative Investment Market has been spectacularly successful but does that success prove the value of a “light touch” on enforcement? The answer probably depends on what a country most wants its capital markets to do: either attract foreign listings, transactions and trading volume, or reduce the cost of capital to issuers.