Sorry, but fixing one wrong with another is not the way. Are you honestly saying that stock shorting is the only incentive someone has to look at fraud? I don't buy that one bit.
You answered it, fix regulators, and heavily punish fraud, don't let people get away with a slap on the wrist. This is literally the job of the justice system. You may as well say what benefits do police or FBI have for catching criminals. The reward is a stable and just society, on top of their salaries.
On a side note, this is one aspect that religion addresses. Ripping people off is not going to end up well when facing God.