Author
Prof XIAO Yu
Organisation/Institution
East China University of Political Science and Law
Country
CHINA
Panel
Banking and Finance
Title
Function of Securities No-profit Organization in Investor Protection : Observation of China’s Experiment Practice
Abstract
Investor protection is very important to securities market, and some are similar, some are different in different countries. Public enforcement and private enforcement play important roles, at the same time, each country has its own characteristics in practice. In the United States, private enforcement is mainly by securities class litigation, while public enforcement is by SEC's regulatory system. China is exploring a new path with Chinese characteristics to protect investors, the government set up securities No-profit Organization（NPO）,It participate in lawsuits, participate in shareholder meetings as minority shareholders. This study will discuss the role of China securities NPO, China Securities Investor Service Center(ISC), focusing on the role of in special representative litigation，which also be named China’s class action. In China’s class action, ISC as the special representative, brings the action on behalf of all eligible investors who have not opt-out , and the result of the action is applied to all such investors. Now KangMei Pharmaceutical and Zeda Yisheng two cases have been applied, and all qualified investors have been fully compensated, and investor protection has been achieved completely in these cases. What’s more, the amount of compensation is high enough to deter the offenders. In my proposal, I will not only discuss how the NPO play its active role in investors protection, but also discuss its potential negative influence, Such as the relationship with the lawsuit brought by lawyers. In my opinion, the NPO will not substitute the role of lawyers , but just lead and supplement the market lawsuit. For the resources of NPO limited, but the resources and profit motivation are unlimited. The lawyers will take more lawsuits, quantity is also important factor for protect investors. What’s more ,I will discuss the possibility of the practice be transplanted or used for reference in other country or region. Compared with American class-action, NPO model can avoid the lawyers abuse of lawsuits for profit incentives. Compared with Taiwan Region, where securities litigation is mainly initiated by NPO, the quantity of litigation is low. The coordination of the application of lawyers and NPO will explore a new path of securities litigation. And China’s practice will experiment in such innovation of investor protection.
Biography
Professor of International School of Law and Finance in East China University of Politics and Law(ECUPL), major in Financial Law, Securities Law and International Financial Law. I have Undertaken the National Social Science Fund of China research project named of Research on the Legal Implementation Mechanism of Securities Issuance Registration System Reform. I have Published the paper such as The Boundary between client's instruction and asset manager's responsibility; Advancing Compensation for Securities Market Misconduct ;The Fiduciary Duty of Private Equity Fund Managers.
