Legal Study On Securities Company Withdrawal Mechanism

Competition is the soul of market economy. In China's endeavor to build the market economy, a very important task is to introduce, establish and safeguard the competition mechanism. Development of the competition mechanism signifies and measures the level of maturity of the market economy. One of the outcomes of competition is survival of the fittest, and only competition that produces such an outcome can be called competition in the full sense. Any one that fails in the market competition has to exit. However, exit of the market players may adversely affect and harm the interests of other players, or even cause market disruption. Therefore, the process of withdrawing from the market is a process of coordinating the relationship between the ousted and their competitors and the market, safeguarding interests of all players and ensuring market stability. In this sense, there can be no stable market without a uniform withdrawal mechanism. Just as one scholar observes,"for a market to sustain, there needs not only a good start but also a good exit. Only such a society is an orderly society."An important task in building the market economy is to establish a comprehensive market withdrawal system, which is one of the indices for market maturity. Ever since China pursues the socialist market economy, competition has been widely recognized by the society, but due to various reasons, the work of ousting the failed is not well done. Of the most importance is the lack of a healthy social security system, which causes dysfunction of the withdrawal mechanism that in turn protects the weak and reduces the competition.The stock market is full of severe competition and sudden changes where securities companies may be in and out in any moment. China already has the securities company withdrawal mechanism in operation, but in a certain sense, the related institutions are out of sight. Therefore, to establish a benign market withdrawal mechanism so that the securities companies that cannot or are unwilling or are not allowed to continue operation can exit smoothly has become a very important topic in company law and securities law studies.The securities company withdrawal mechanism is an important part of the securities market institutions all over the world. The characteristics of"growth + transition"of China's stock market make it inevitable for the securities company to have accumulated a lot of problems and risks. A healthy securities company withdrawal mechanism is beneficial for the self-constraint of the securities company and enhancement of the incentive mechanism, beneficial for perfecting the securities market running and the supervision system, and beneficial for internationalization of China's securities market. Establishment of a healthy securities company withdrawal mechanism is the natural choice of China's securities market for meeting current and future challenges and enhancing competitiveness.Selection of this topic for my dissertation is out of my thoughts on the current statuses of China and foreign securities company withdrawals from the market and stimulation from related theoretic studies. The subject matter of this dissertation is how to construct, from the legal perspective, China's securities company withdrawal mechanism. The thesis is that China should establish a market-oriented proactive securities company withdrawal mechanism supplemented by administrative guidance. The aim of this dissertation is to learn from securities company failures, avoid the risks of the securities company committing illegal and irregular operations, improve the core competitiveness of the securities company, and realize the sustainable development of the securities company; besides, this dissertation aims to provide theoretic and real guidance to the future operations and development of the securities company.Chapter One General Analysis of the Securities Company Withdrawal Mechanism first precisely distinguishes from the legal perspective the key terms and phrases used in the securities company withdrawal mechanism, then it elaborates the theoretical foundations of the securities company withdrawal: theory of market failure, theory of institutional evolution, and theory of externalities.Chapter Two Analysis of the Root of the Securities Company Withdrawal studies the root cause for the securities company withdrawal by focusing on the securities company operation failure. After surveying the operation failures of China's securities companies, this chapter finds that: the fundamental cause is the alienation of the role of the securities market; an important cause is the incompleteness of related institutions and impotent supervision; the apparent cause is the unreasonable corporate governance structure of the securities companies; and the immediate cause is the illegal and irregular operations of the securities companies. This chapter selects several cases of China's securities company withdrawal: select typical cases of problem securities company withdrawals, draw the trajectory of governance, and analyze the characteristics of the problem securities company withdrawals. Chapter Three The Overall Thought of the Securities Company Withdrawal and the Institution Selection first analyzes the necessity of establishing a healthy securities company withdrawal mechanism; then, it sets out the basic principles for that: marketization, protecting investors, prudence, lawful withdrawal, prompt handling, and principle of accountability holding, reveals the nature of China's securities company withdrawal mechanism, and, finally, elaborates on the factors to be considered in building a healthy securities company withdrawal mechanism: the degree of marketization of the securities market, the degree of monopolization, government running mode and market openness.Chapter Four Mechanism for Preventing against Securities Company Withdrawal studies in depth the various legal obstacles facing the preventive system and the aiding system, and provides solutions thereto. A scientific and operable risk-alerting system focuses on liquidity-related risk while also considering the legal, credit, operation and market risks is beneficial for identifying promptly and objectively the all kinds of risks that the securities company may have, and makes solid preparations for selecting whichever mode of withdraw. A comprehensive legalized aiding system can improve the securities company's capabilities and efficacy in coping with crises, and reduce the impact of the crises upon the general society, finance and economy. By the type of deliverers, the aiding system can be categorized into self-help aiding system and external aiding system.Chapter Five Regulation of Securities Company Non-bankruptcy Withdrawal first analyzes such withdrawals as ordered closedown (withdrawal), administrative take-over, trusteeship, shutdown for rectification, loss by revocation of the business license for dealing with securities business (standing for dealing with securities business) , and M&A. Then, this chapter elaborates on the general process for a securities company to withdraw from the market: apply for withdrawal, liquidate, and cancel the registration. For a securities company to withdraw from the market, the CSRC approval is a must. Liquidation refers to sorting out the company's assets so as to put an end to all legal relationships of the company and to put an end to the legal status of the company. After the securities company withdraws from the market and loses its legal standing, the liquidating team must go to the industry and commerce bureau for cancelling the registration.Chapter Six Regulation of the Securities Company Bankruptcy Withdrawal first analyzes the significance of establishing the legal system for the securities company bankruptcy; then it reviews and analyzes the U.S. legal system for the securities company bankruptcy that may shed light on China's effort to create ours, and finally proposes for creating China's legal system for securities company bankruptcy: innovate China's concept of the legal system of securities company bankruptcy and establish the principles for setting up the bankruptcy legal system, as well as critically analyzes the reorganization process and liquidation process for the securities company bankruptcy. The new Bankruptcy Law has clear provisions for the bankruptcy of the financial institutions such as the securities companies and authorizes the State Council to work out the detailed provisions for implementing the law, which signifies China's further openness in the areas of equity market and financial market.Chapter Seven"Post-withdrawal"Mechanism on the Securities Companies studies the mechanism for dealing after the affairs of the post-withdrawal securities companies by focusing on the securities investor protecting fund system. This chapter first analyzes the necessity for protecting the investors; then, after studying the legislations for and operation modes of the investor protecting funds in U.S., Japan, Canada and Hong Kong, summarizes the foreign practices that might shed light to us, and finally, critically analyzes China's basic legal system for protecting the securities investors. The investor protecting fund system is an indispensable link in the whole system of investor protection. In mature foreign markets, the investor protecting funds are set up creatively and in line with their specific national conditions. China's securities investor protecting fund is groundbreaking, compensatory and remedial in nature. China's securities investor protecting fund system has the following characteristics: it opens the door for trusteeship and liquidation of the securities companies, it is beneficial for making institutional innovations on the securities company withdrawal mechanism; it has a limited scope of protection and remedies; it is not preventive in nature and is thus only a remedy mechanism. The above said, the corporate governance structure of China's securities investor protecting fund still has much to desire, it has no clear standards for the aggregate amount and compensation limits which makes it hard to decide the degree of protection, it has no operable settlement process and thus no settlement expectation, and the role of the intermediaries shall be enhanced so as to give full play to the group lawsuits or the arbitration system.Chapter Eight Supervision Mechanism on the Securities Company Withdrawal studies the supervision by focusing on CSRC. First, this chapter analyzes the theoretical foundation for CSRC supervising the securities company withdrawal; then, it elaborates on how to perfect CSRC's supervision on the securities company withdrawal so that it can play its role as expected. Among the various legal issues concerning the securities company withdrawal mechanism, the role-setting and power delegation are of particular theoretic and realistic significance. In CSRC's supervision on the problem securities company's withdrawal, it shall, on the basis of following the market rules and aiming to protect the investors'rights and interests and reduce the systemic risks, adhere to the principles of marketization and legalization, use prudence in exercising its powers and avoid unwarranted intervention.