Definition of 'Regulatory Arbitrage'
A practice whereby firms capitalize on loopholes in regulatory systems in order to circumvent unfavorable regulation. Arbitrage opportunities may be accomplished by a variety of tactics, including restructuring transactions, financial engineering and geographic relocation. Regulatory arbitrage is difficult to prevent entirely, but its prevalence can be limited by closing the most obvious loopholes and thus increasing the costs associated of circumventing the regulation.
Regulatory Arbitrage is a term that came out of the fancy footwork finacial games that led to the troubles we're all in these days.
It sums up what has gotten my goat for many years about F1. For some time now we have had teams engaging in regulatory arbitrage.
They people on hire for whom their whole job is to engage in regulatory arbitrage. That's how in a throwback to the Clinton era we have arguements and discussions over what constitutes a hole.
And once we do, we have Ferrari figuring out that if they cut a 1/64 inch slot to the edge, well then it's not a hole and we can get away with what has been banned,,, so we have to make another rule which the regulatory arbitragiers (is that a word?) then set to work finding a loophole in.
To me it's crazy and to dance that close to the edge in a desire to do what's banned seems immoral. And no that's not aimed at Ferrari,,they all do it.