Cost of regulatory moodswings

Life’s a wave for all – has its highs and lows…SEBI is no exception.

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On occasions it’s on a regulatory Viagra and at others just as it has now, it goes flaccid. It’s the same with regulators everywhere.

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In the US Sarbanes-Oxley (SOX) is a poster child for a government act whose cures are worse than the disease. Given several ways to dodge its regulations, if one is intent on doing so, efforts to check will almost always fail. To ensure companies comply with the SOX regulations, the four large accounting firms that do almost all public company audits have raised their fees an average of 78 percent to 134 percent in 2004. Professor Ivy Xiying Zhang of the University of Rochester has calculated SOX has resulted in a cumulative loss of $1.4 trillion for the shareholders of public companies – that’s an average loss of about $460 for every US citizen.

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In India the regulatory cost will be borne by just about 5% of total population that has any exposure to stock markets. Now do your own math...

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