Traditionally, authorities would put in place a precise set of rules, aiming to limit and control activities undertaken by market agents. Upon appearance of new (thus unregulated) products, services, technologies or players, an update would eventually become inevitable, so as not to have regulatory arbitrage or an uneven playing field. This approach, despite presenting clear boundaries for market agents, lacks in flexibility and agility.
Country Examples
In 2002, following several corporate governance scandals, US Congress enacted the Sarbanes-Oxley Act (SOX), which imposed strict requirements on publicly traded companies on topics like financial reporting and internal controls. SOX specifies detailed rules and procedures to protect investors through fraud prevention. It achieved some laudable results such as stronger controls, better auditing and more consistent internal processes, being 10 years later replaced by the JOBS Act, which installed lighter regulatory requirements for small companies, aiming to favor economic growth.1;2
1. Lehn, K. (2008), “Sarbanes-Oxley: A Review of the Empirical Evidence and a Proposal for Reform”, University of Pittsburgh, https://www.atlantafed.org/-/media/Documents/news/conferences/2008/08FMC/08FMClehn.pdf (accessed on 21 August 2025).
2. J. Zeidel, M. (2016), The JOBS Act: Did It Accomplish Its Goals?, https://corpgov.law.harvard.edu/2016/07/18/the-jobs-act-did-it-accomplish-its-goals/ (accessed on 21 August 2025).
