The Study On Securities Fraud Civil Litigation’s Leading Model

In recent years, China’s securities market got rapid progress, but the problem of securities investor protection have become an obstacle to further developments of securities market. China’s investors of securities market are suffering from infringement of listed company, market intermediary organizations, institutions and bankers, and more than that, there is no effective relief. Therefore, strengthening protections for investors has important practical significance to developments of multilayer capital market and constructions harmonious society. The protection mechanisms of securities investor mainly have law enforcement by public power, private litigation and corporate governance. Recently, western theory around what kind of mechanism can effective protect securities investors have produced series of theory, including pierstor and XuChengGang’s opinion of exercising the rest legislative power by regulator agencies, based on "incomplete law". However, LLSV through empirical studies of49countries and regions put forward that private litigation right have more effects on protecting investors than enforcement of public power. As for China, although has not been development to the process of making optimization choice between enforcement of public power and private suit, the protection for China’s securities investor needs to be make advances all in law enforcement of public power, private litigation and listed companies improvement. In theory, the pattern of law enforcement by public power have some defects,such as limited resources, regulatory capture, rational public choice by economic man, and the theory that the development of law enforcement by private could make up for such defects. In reality, at present,China’s securities law enforcement by public power have some obstacles in low efficiency of law enforcement, high corruption index, multielement regulatory targets,poor convergence, regulators and targets are connected in the system of law enforcement by public power. At the present situation, development of securities fraud civil litigation can have practical significances in compensating for victims’loss, intimidating illegal misfeasors,and improving overall protection levels for investors.The case of Securities fraud civil litigation has characteristics of small amount and much quantity. Although total loss is large amount, the loss is small to single investor relatively. Because this kind of case is expertise and complexity, litigation cost is high, while such litigation income is low in the global scope. Game analysis based on the theory of olsen, there is no hard to find that t most investors will choose "free-rider", therefore in securities fraud in civil procedure have been produced "collective action dilemma". Olson believed that "asymmetric" and "selective incentive" can resolve such predicament of collective action dilemma, namely the part of people if can get more benefits than others, or they can sell their private products when they provide public products, then this part of people will take initiative for providing public products. This solution in comparative law is American lawyer’s leading in securities fraud civil action. The securities investor protection is essentially a kind of public products, in case of market failure and government failure,the supply of public products can be supplied by non-profit organizations. This solution in comparative law is the non-profit organization by East Asia’s leading in securities fraud civil action. Two solutions both have their own advantages and disadvantages. On the one hand, Although lawyer’s leading model is high efficiency the advantages, there are also a series problems in disciplinary action, lawyers and the defendant are in cahoots, investors can not get the actual compensation and lawyer became the only beneficiaries, caused by incentive excessive to lawyers;On the other hand, the non-profit organization’s leading model can avoid disciplinary action and effectively support government enforcement actions, but there are also shortcomings in inefficiency, organization management dilemma, independence problem, funds shortage.For China, the American model of lawyer’s leading is improper right now, since there are different in legal structure,roles of judges and courts in continental law system and common law system, and recognition of "punitive compensation" in two countries. More than that, China’s social culture keeps an alter attitude to lawyers’ commercialization operations of lawsuits,and authorities also have some political concerns for securities groups. The Taiwan’model, promoted by government to establish non-profit organizations is good transition plan for mainland. Taiwan and mainland have similar legal tradition and securities market structure. The choice of Taiwan’model can minimize legal reform cost,and government-led non-profit organization also has political acceptance. For the future development of China’s non-profit organizations leading securities fraud civil action, the first in the organization construction, should develop existing China’s securities investor protection fund companies to professional investor protection organizations. Litigations for protecting agency organization investors shall be the legal nature, and lawsuits for protecting organizations also have corresponding supporting litigation system, such as cases accepted and type, damaged investors authorization and withdraw, favorable litigation costs, standard of writing judgments, implementation and appeal, and so on. Besides litigation proceedings, protection organizations have some other functions:acceptance of consulting appeal and investors compensation, mediation securities disputes, practice of shareholder activism, conducting education, etc. Investors should also strengthen supervision of competent authority, improve organization transparency, perfect governance structure of organization to realize protection to promote the efficiency of organization.