Legal Transplantation And Control

This thesis discuses, on the basis of general principles as regards to intermediaries in securities market, the role of and controlling mechanism to lawyers who conduct business in the field of securities, the purpose of which is to explore and rethink the conflict between supplant of law and the tradition of control.Playing as "third-party enforcement mechanism" , intermediaries are esigned to fill the gape left behind by the other controlling mechanisms, such as guaranty by issuers' reputation, warranty by contract and legal liability. The problem of unbalanced sharing of market information may be solved through private credits provided by intermediaries to issuers, which brings mutual trust to issuers and investors. The appearance of intermediaries, as a normal case, is an inherent choice of market which satisfies the demand of saving cost. Nevertheless, conflict lies between intermediaries and investors, the ultimate service consumers. Therefore two different controlling mechanisms, namely the mechanism of reputation and the mechanism of legal liability, should be put on intermediaries.In China, the service provided by lawyers adds little value to securities market, except resulting in the increase of transaction cost. The investors, as well as the regulators, are not able to rely on lawyers to distinguish or dismiss the malpractice of companies. Consequently, the provision of legal service is desired merely by regulators, through which an rtificiallylegalized securities market may be established, and the aim set forth by regulators may be realized while the investors pay the bill. Under this controlling mechanism, it' s the State credits provides tacit warranty which promotes the development of securities market, private credits by intermediaries is of no need. Therefore, it' s totally unwise to follow the practice pattern of foreign intermediaries in China.The licensing system of lawyers limits the accessibility to securities market, which protects the interest of a small group. The conflict between lawyers and investor are still left unsolved, and the regulators are unable to pick up most capable lawyers. As a result, competence and liability controlling system should be introduced in order to make lawyers act with due diligence.Under the controlling system, lawyers may make profits in reliance with "rent" , which makes them pay no attention to the maintenance of their reputation. More worse, in the lack of reputation control, regulators exercise sanction power exclusively, and courts refuse investors claim damages through civil litigation. The liability controlling system evidenced by the text of SECURITIES LAW of China has not been carried out in practice. Therefore, the assisting and abetting in misrepresentation by intermediaries, including lawyers, are a logical and wise choice under these circumstances.On the other side, in order to be enforceable for all situations, in particular for unexceptional situation, law is always incomplete. As a result, the quality of legal service should be improved through Interpretation, not verification or sanction. Liability controlling system is a kind of "harsh" enforcement mechanism, with highest cost and most inaccurate effect. The effective enforcing method in developed economy may, within a long period of time, have little effect in transacting economy as China due to incompleteness of law and control of information. Discretion owed by enforcement authority may enlarge, not reduce the width of corruption.In conclusion, the legal system which has plan and control as its core may not be able to establish market economy. The development of capital in one country may not attribute to the best copy of foreign legal system. Capital market should loosen control and provide as wide as possible the room for competence and creation.