No more regulators

“When a few people have differences of opinion, set up a committee. When many people have differences of opinion, set up an independent regulator.” This seems to be the favourite maxim of quite a few governments. The Centre is planning to appoint independent regulators for services such as medicine, law, chartered accountancy, cost accountancy and company secretaryship, since the existing regulator-cum-professional bodies have resulted in several alleged instances of conflict of interest.

This hurt credibility and hampered India’s attempts to secure Mutual Recognition Agreements (MRA) with other countries to enable easier temporary movement of skilled workers and professionals across borders. MRAs are pacts by which two or more nations recognise each other’s compliance assessments to ensure that services, products and processes meet relevant technical norms.

The independent regulators will maintain a distance from professional bodies such as the Medical Council of India, Bar Council of India, Institute of Chartered Accountants of India, Institute of Cost Accountants of India, and Institute of Company Secretaries of India.

At present, all large multinational audit firms operate in India. They have formed local partnerships and acquired local accounting firms projecting their brand. Indian accounting firms feel choked by their presence and the general feeling is that there is no level playing field in certain areas of professional services. The entry of more players into the market will only add to the crowd. A similar scenario plays out when Indian firms bid for work abroad — they have neither the qualifications nor the experience to get such assignments.

The need for yet another regulator needs to be seriously rethought. As a reaction to the Satyam and Sahara scams, the Government promulgated a very rigorous Companies Act in 2013. This is probably the only Act that uses the word ‘imprisonment’ more often than the Indian Penal Code. It levies stiff penalties on companies and auditors. The Act also envisaged creating a National Financial Reporting Authority (NFRA) to prescribe accounting standards and regulate the accounting community. However, it’s been a non-starter. It is ironic that the Government is contemplating a new regulator when the erstwhile one is yet to commence regulating.

The Government may have a point when it states that not all is well with the present self-regulatory mechanism. But it is a fact that it has not done much to fix the existing system.

All the professional bodies have been set up under Acts of Parliament — this gives the Government supreme powers to monitor and police these bodies. For instance, at the ICAI, the Government can appoint a CEO (instead of the present system of a president a year) for a period of three years. As in any corporate, the salary of the CEO and the team should be linked to performance.

Instead of burning time, money and resources on creating new regulators, finding them space, staffing them and getting them to work, the Government can empower existing regulators to punish the doctor who operated on the wrong eye, the accountant who signed a balance sheet knowing it to be untrue and unfair, and the advocate who represented both the accused and the defendant. Otherwise, the new regulator could end up like the NFRA and the NITI Aayog — catchy names with nice job descriptions but no work to speak of.

The writer is a chartered accountant

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