A Blunt Regulatory Knife

Imagine criminals that have sophisticated guns, satellite radios, bombs, strong armour, GPS trackers and fancy cars. And imagine someone has been given the task of "policing" them from a bullock cart, with only bows, arrows, and a sign that says "Stop, or I'll say stop again".

In the civilized world, it would be entirely unnecessary to kill the regulator. As long as you have the technology, you just have to get away in your car when a bullock cart chases you, and let your armour take the brunt of any bow or arrow that's fired.
This is how our regulatory system is.
Bernie Madoff was "discovered" at about the same time that Satyam founder Ramalinga Raju admitted he fudged accounted. Mr. Madoff is now cooling his heels in jail, where he will be for the rest of his life. Ramalinga Raju's only relation with heels is that he's probably getting a pedicure - he is out on bail and the cops haven't even been able to cobble together a case.
That story isn't the only one. The 2G scandal involving A. Raja hasn't seen a conviction. The Adarsh housing scam is still "under investigation". The Commonwealth Games scam, the Tatra scam, and even the Fodder scam of 1996 (which has only recently seen charges framed!)
It is no wonder that fraudsters operate with impunity. We just do not convict white collar criminals in India.
It's not just plain outrage. In many cases the penalty does not even meet the scale of the crime.
Recently, the Insurance Regulator, IRDA, passed an order against HDFC Life Insurance, asking it to pay a fine of Rs. 35 lakh. The crime? That it paid certain linked corporate agents, like HDFC Bank and HDFC Securities, excess money in the name of "marketing expenses". They were paid Rs. 428 cr. and 133 cr. respectively, which was more than 2.5 times the money actually spent.
Think about it. You spend Rs. 200 cr. You get reimbursed with Rs. 428 cr. And you pay a Rs. 0.35 cr. fine. You'll take that deal every day of the week. And it's not IRDA's fault — it seems they can't fine more than Rs. 5 lakh per "instance", and there were just seven instances.
SEBI, the securities regulator, had provided a "consent order" against Anil Ambani and his aides in 2011, allowing them to pay Rs. 50 crore and banning them from the securities market for about a year. It has turned out that in an enquiry, a UK Tribunal found that a certain Sachin Karpe had created a front for Ambani's RCOM, using a Swiss bank account and a Mauritius entity to trade RCOM shares. The profit? Potentially, Rs. 600 cr. A fine of Rs. 50 cr. with a meaningless ban, to earn (and keep) a profit of Rs. 600 cr? That is one sweet deal (and SEBI doesn't even have the limits that IRDA does)
But it's not always the regulator's weakness. A regulatory order can be appealed at multiple levels, which in India just means a very long delay. Case in point: a brilliant order by SEBI against the Sahara group essentially cancelling a debt offering of over 20,000 cr. has been upheld by SAT and then has been stayed by the Supreme Court, and could take a long time to run through. While the appeal process is a principle of justice, it would indeed be a shame if the system is being subverted only to buy time.
Recently the Competition Commission of India fined certain cement companies over 6,000 cr. — about half their profits of the last two years — for forming a cartel and hiking up prices artificially. It had earlier fined DLF over 600 cr. for abusing its market dominance in Gurgaon. Both these awards have gone on appeal, with a tribunal asking CCI to justify the fine amount in the DLF case. A proper method to calculate fines, with an additional amount for punitive damages to discourage other wrongdoers in the future will solidify the case for CCI.
When regulators overreach, there may be further trouble and a need to counterbalance them. And it causes damage when a regulator is a participant as well. The Reserve Bank of India is a bank regulator — it is the lender of last resort and the authority all banks must report to. Yet, it is also a player in the foreign exchange market. It is also the merchant banker to the government for selling GOI bonds. These introduce unnecessary complications; these functions should be moved out into independently managed institutions, even if the initial manpower comes from the RBI.
Regulators need to be able to disgorge all profits and then charge further fines. If a bank missold a policy to you, the bank should not only reimburse the policy amount, but also pay a fine, part of which goes to you. If a promoter earns illegal profits through insider trading, the full profit should be paid as a penalty with a further fine, including 18% interest for the time they enjoyed the money. Appeals should be dealt with swiftly, in all channels including the Supreme Court. Regulators needs strength and teeth. If we are outraged that doctors can get away with murder or that the ICAI has not still taken action against the Chartered Accountants at Satyam, we need to force our government to give the regulators more power, and provide the public accountability through mandatory reporting and RTI based disclosures.
After all, you can't take a knife to a gunfight.